There are three types of Offers 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?
- Effective Tax Administration – While the IRS has every right to collect the tax debt in full, it may create an undue hardship to the taxpayer given special circumstances such as age or health.
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, Offers-in-Compromise, Currently Not Collectible and Innocent or Injured Spouse applications.
By definition, an Offer in Compromise is appropriate when the IRS is willing to settle a taxpayer’s debts for less than the full amount owed.
Doubt as to liability arises when the taxpayer contends that he or she doesn’t owe the money that the IRS is attempting to collect. This could arise in a case of mistaken identity where the IRS is attempting to collect from the wrong John Smith, or more likely, in a payroll tax case where the taxpayer claims that they are not a responsible party regarding the unpaid company payroll taxes.
The taxpayer is not required to submit personal financial information but is required to submit documentation proving that they either are not the person the IRS thinks they are or are truly not responsible for non-payment of payroll taxes.
They must make an offer to settle the debt, not zero, be in tax compliance for the next five years and attempt to recoup any monies levied by the IRS through other procedures away from the offer process, like audit reconsideration.
If you have years of unfiled tax returns or owe the back taxes, please call me. I can help.