Many people ask the question, “what about relief for federal taxes?” There is a huge misconception that exists today regarding that. The answer is that there is no IRS Tax Amnesty Program. Generally, what taxpayers may be hearing about, therefore getting it confused with Tax Amnesty, is the Offer in Compromise Program.
So why no Amnesty for the IRS? The Federal Government does not want to set a precedent of ever forgiving tax debts. The reason for this is simple, people would be waiting until the next tax amnesty program before filing and paying. Most States have successfully implemented tax amnesty programs, however; I clearly do not see any shift in the IRS’ official position in the near future.
The IRS Program that would be most similar to Tax Amnesty programs are the Offers in Compromise program. There are three types of offers in compromise:
- Doubt as to Collectibility
- Doubt as to Liability
- Effective Tax Administration
The Doubt to Collectibility Program is the best settlement solution for most taxpayers. This program is based on an inability to pay back the government based on current financial circumstances. The IRS requires a financial statement and tax form 656 to review ones position.
Caution should be used before picking a tax firm to move forward with an Offer in Compromise.
12,000 Offers in Compromise are accepted each year while 48,000 are filed. The nice feature about the Offer is that not only is the liability compromised, but the federal tax lien is released when the tax is paid in full.
