The Offer-in-Compromise program is the least understood but most widely publicized tax resolution option available. If you are a TV watcher, you will see the commercials touting them every night.
Over the next several weeks, I am going to write about this topic in detail.
My firm, By The Book Taxes, located in Norwalk, CT specializes in income tax preparation for individuals, families and self-employed people. By the Book Taxes also helps clients resolve their tax debts by preparing and filing Installment Payment Agreements, Offer(s)-in-Compromise, Currently Not Collectible and Innocent/Injured Spouse applications.
By definition, an Offer-in-Compromise is when the IRS is willing to accept less than full payment to settle a taxpayer’s tax debts.
There are two types of Offer(s) in Compromise:
- Doubt as to Collectability – Does the taxpayer actually have the income and assets to pay back all the taxes owed?
- Doubt as to Liability – Does the taxpayer really owe all that the IRS is looking to collect? Is there a dispute here?
In order to be a candidate for an Offer-in-Compromise, a taxpayer must be in compliance. The IRS defines compliance as having filed the last six (6) years of tax returns, having enough tax withheld from your W-2 income to satisfy your tax liability, or, if you are self-employed, being current on your quarterly estimated tax payments.
If you are in compliance, you may choose to file an Offer-in-Compromise requesting one of the two available payment scenarios:
- Lump Sum Offer – 20% down payment of offer amount plus filing fee upon filing offer and full payment of accepted offer within five (5) months of acceptance date.
- Short Term Deferred Offer – Payment of filing fee upon offer plus monthly payments while offer is being reviewed. Payment in full required between six (6) months but no later than twenty-four (24) months after acceptance. Monthly payments based upon offer amount paid in twenty-four monthly installments.
There will be much more detail on this program coming in the next several weeks.
If you have years of unfiled tax returns or owe the back taxes, please call me. I can help.