Offer in Compromise
An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship. Not everyone qualifies for the offer in compromise program. We review your unique set of facts and circumstances to evaluate if you would qualify for the program or if other payment options are better suited for your situation. When evaluating your offer we will review the following:
- Asset equity
The IRS generally approves an offer in compromise when the amount offered represents the most the IRS can expect to collect within a reasonable period of time. Before filing an offer, you must be current with all filing and payment requirements. Also, you are not eligible for an offer in compromise if you are in an open bankruptcy proceeding. Your offer is submitted with a $186 application fee and an initial payment varies based on your offer and the payment option you choose:
- Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
- Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.
While your offer is being evaluated the following is true:
- Your non-refundable payments and fees will be applied to the tax liability
- A Notice of Federal Tax Lien may be filed
- Other collection activities are suspended
- The legal assessment and collection period is extended
- Make all required payments associated with your offer
- You are not required to make payments on an existing installment agreement
- Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date
Frequently Asked Questions – Offers in Compromise
What are the qualifications of an offer in compromise?
A person may qualify for an offer in compromise three separate ways:
1. Doubt as to Collectibility
2. Doubt as to Liability
3. Effective Tax Administaration
What forms will I need to request for an offer in compromise?
To submit an offer in compromise the requirements vary depending on whether you owe individual or business tax debt. The application process is complicated and requires a lot of documentation, so it is best to consult with an experienced tax professional first. Typically to apply you will need the following documents:
- IRS Form 433A or 443B
- IRS Form 656-A or 656-B
- 3 months of documentation on all expenses and income sources
I submitted my offer, how long will it take the IRS to make a decision?
Once you have successfully submitted an offer in compromise to the IRS it will typically take between 6 to 9 months for the IRS to respond to an individual taxpayer and between 9 to 12 months for a business or self-employed taxpayer. Times do vary based on the complexity of the case and the IRS workload. It is best to check in with the IRS periodically to see how the process is moving along.
What happens if my offer is rejected?
If your offer in compromise has been rejected by the IRS you have the right to appeal the decision. You have 30 days from your denial date to file an appeal.
I owe state taxes as well. Will the State accept my offer in compromise?
No, in order to file an offer in compromise with your State, you will have to file a State Offer in Compromise. Again it is best to consult with an experienced tax professional to make sure that you are filing the correct information.
How can I schedule a consultation with Strategic Tax Resolution?
To schedule a consultation with Strategic Tax Resolution please contact us via our main office line (216) 260-1000 or by visiting our contact us page.