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What is an Offer In Compromise, and How Can it Help Me?

Tax Consultation, Tax Negotiation and Settlement

An Offer in Compromise is a method by which people can settle debt with the Internal Revenue Service for less than the total amount owed. That may sound great, but there are substantial requirements and limitations to this offer.

There are three situations in which an application for an Offer in Compromise may be accepted. These situations include:

  • When the IRS evaluates that you have too low a Reasonable Collection Potential (RCP) for them to get the full amount.
  • When there might have been an incorrect assessment or some other aspect to make your tax bill incorrect.
  • When paying your tax bill is likely to create great financial hardship or be deeply unfair.

There are other limitations, such as the fact that you cannot be going through bankruptcy, you must submit all requested or required documents (including tax returns), and you must pay the application fee of $186. The IRS offers a pre-qualifier tool to see if you might be able to benefit from an Offer in Compromise.

Offers in Compromise now are part of the new Fresh Start Initiative, which seeks to offer this option to a wider variety of taxpayers due to new flexibility in assessing ability to pay. If you are struggling with how to handle or manage your tax debt and fall into any of the above categories, it can be beneficial to apply for these kinds of offers and set up either a lump sum or payment plan. Though the payments may seem high, they aren’t as high as they would be if you had to stay with the debt, and the debt can be wiped clean if the IRS accepts your offer.

Civic Tax Relief can be helpful in assessing your specific case to decide not only whether or not an Offer in Compromise is a good idea for you, but also to make a fair offer that the IRS is likely to accept. To schedule an appointment, call (800) 857-5455, email (info@civictaxrelief.com), or reach out.