Offer in Compromise

An offer in compromise is the IRS’s settlement program. It allows you to resolve your debt for an amount based on your financial situation rather than the total amount owed.

An offer in compromise is by far the most sought out resolution. I mean, who wouldn’t want to settle their tax debt for less than the full amount owed? The problem is that the IRS isn’t like other creditors. They have very strict terms under which they will agree to a settlement and it involves a set calculation that determines the minimum acceptable offer. The two main factors are equitable assets and disposable income. That makes this an ideal resolution for individuals with relatively few assets and minimal disposable income. I say relatively because the total amount you owe also comes into play here. It may seem counter-intuitive but the more you owe the more likely you can qualify.

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Something to keep in mind about an offer in compromise is that the process is lengthy. It’s not uncommon to see a year go by before you come to an agreement with the IRS. While an offer in compromise is pending the IRS cannot pursue collection action against you, but penalties and interest are continuing to accrue. This is a moot point if the IRS accepts your offer but if your offer is rejected this can lead to a significant increase in your balance.

It’s also important to note that if the IRS accepts your offer, they expect you to come up with the funds quickly. In most cases, an agreed-upon offer in compromise is expected to be paid in full within five months of acceptance. There is an alternative twenty-four-month payment plan, but it typically causes the minimum settlement to double.

In the end an offer in compromise isn’t for everyone. However, if you have little to no assets and a relatively low income compared to your total debt this could be the right resolution for you. Schedule your free confidential consultation today to find out!

Settlement Categories

For Balances Under $50k

Offer In Compromise

Six- To Nine-Month Process

Requires Financial Statement

Federal Tax Liens May Be Filed

For Balances Above $50k

Offer in Compromise

Nine- To Twelve-Month Process

Requires Financial Statement

Requires Approval By Council

Federal Tax Liens May Be Filed

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