Taxpayers who have significant debt for a tax single year, or tax debt spread over multiple years, will often enter into an installment agreement. But there’s another option if you have the funds to make an adequate lump-sum payment, even if it’s just a portion of what you owe.
An offer-in-compromise is essentially an agreement negotiated between you and the IRS. It allows you to resolve existing tax debt by making a significant one-time payment. Many taxpayers are able to settle their IRS tax debt for less than half of what they actually owe, and this process also saves the IRS time and money spent trying to collect the whole sum over a longer period of time.
If you wish to make an offer-in-compromise, there are a few restrictions. First, the level of tax debt you have must well exceed your financial resources and your ability to pay. In other words, if it’s unlikely the IRS will ever collect the full amount owed based on your income level and the value of your assets, the offer is more likely to be accepted. Second, you must pay the maximum amount the IRS determines that you can afford, once your resources and situation have been reviewed.
While the basic premise of the offer-in-compromise is simple enough and it seems like a great option for taxpayers, there are some obstacles that prevent people from taking advantage of this form of tax resolution.
Proving the tax debt imposes an unfair economic hardship, which will also affect the taxpayer’s ability to pay down the debt over time, can be challenging. Disputing the amount owed may be time-consuming and frustrating too, and of course pulling together the minimum dollar amount required to make an offer the IRS will accept is difficult for some taxpayers. Having a tax expert in your corner and guiding you through the negotiation process is one way to help ensure your offer will be successful.
Once you and the IRS do come to an agreement on a lump-sum amount, after you submit that payment your debt is satisfied and the IRS will take no further action to collect.
Offer in Compromise can be time consuming and frustrating with the regulations in place. The J. Gannon Helstowski Law Firm can assist with your offer in compromise.
What is an offer-in-compromise? Am I eligible to make one?
If you cannot fully pay off your tax debt due to financial hardship, and you will not be able to pay it off over the number of years the IRS has to collect, you may be able to make an offer-in-compromise instead. This is essentially a lump-sum amount negotiated between you and the IRS, which will satisfy the tax debt for a payment lower than the actual total owed. You must demonstrate financial hardship and be prepared to make the payment soon after the negotiations are complete, but it’s a very good option for taxpayers who have large or multi-tax-year debt and are motivated to resolve it quickly.
Once your offer-in-compromise has been accepted and you make your one-time payment, your tax debt is considered paid-in-full and no further IRS collection activity will occur.
Do you offer a free consultation?
Yes, we offer a free consultation. Keep in mind a consultation is the assess your current situation and agree upon a fee arrangement. We may not be able to give you a legal opinion until more research is done given your situation. Sometimes it may be necessary to charge a research fee or analysis fee to give you a complete plan of action and legal opinion. We strive to keep this fee as reasonable as possible.
How much do your tax resolution cost?
We provide the initial consultation free of charge, so we can learn about any tax issues you may have and design a tax resolution plan to meet your needs. We offer many services for a flat fee, and also give you the option of paying over time. We’ll do our best to work with you regardless of your financial situation.