When you owe money to the IRS, it has a way of bogging you down. Not only financially, but also emotionally.
While you may be in an unenviable position, there are steps you can take to escape IRS tax debt and reclaim control of your finances. An offer in compromise is one strategy to consider.
An offer in compromise is exactly what it sounds like. The IRS agrees that you can settle your tax debt for less than what you actually owe. For example, if you owe $20,000 in tax debt but can only afford to pay $10,000, you can make an offer to the IRS. If successful, you won’t be responsible for paying the additional $10,000.
While there is no guarantee that the IRS will accept your offer in compromise, it never hurts to try. But, before you go down this path, you should have an idea of whether or not there’s a chance of success. You don’t want to waste your time.
The IRS will only consider your offer if one or more of the following pertain to your situation:
- There are questions about the accuracy of what you owe
- There is doubt that the IRS can collect the full amount, such as if your income and assets are less than your tax bill
- The debt number is correct and you’re able to pay the full amount, but doing so would cause an undue financial hardship
According to the IRS, they take a variety of factors into consideration when deciding if they’ll accept your offer in compromise:
- Income
- Expenses
- Ability to pay
- Asset equity
Generally speaking, the IRS will only accept an offer in compromise when the amount is close to what they can expect to collect.
There are some factors that disqualify you from approval of an offer in compromise:
- If you have an open bankruptcy case
- If you have neglected to file all past federal tax returns
- If you have yet to make all required estimated tax payments, such as if you’re self-employed
You don’t want your IRS tax debt to hold you down any longer. Learn more about the offer in compromise program, as it pertains to your situation, and decide if now’s the time to proceed.