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IRS Offer in Compromise
In certain circumstances, a taxpayer may be able to negotiate a lower payment with the IRS to settle back taxes. An IRS debt settlement or IRS offer in compromise is an agreement between the taxpayer and the IRS in which the IRS agrees to settle IRS debt for less than the full tax debt owed in exchange for a lump-sum payment.
IRS Tax Settlement through Offers In Compromise
There are many television and radio ads promising to discharge individual’s tax debts for pennies on the dollar through offers in compromise (OIC).
The fact is that OICs can be difficult to negotiate. The IRS has very strict guidelines regarding qualifications for an OIC, and rigid formulas it uses to determine how much money can realistically be collected from a taxpayer.
The IRS examines the taxpayer’s assets, income, liabilities and properties when determining whether to agree to an OIC.
The IRS may accept an OIC based on three grounds.
- Acceptance is permitted if there is doubt as to liability. This ground is only met when there is a genuine dispute as to the existence or amount of the correct tax debt under the law.
- Acceptance is permitted if there is doubt that the amount owed is fully collectible. Doubt as to collectability exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
- Acceptance is permitted based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
Requirements Of An Offer In Compromise
In addition to making a lump-sum payment, taxpayers are often also required to complete other requirements such as:
- Timely file tax returns for five years following the date of OIC acceptance
- Pay tax liabilities on time for five years following the date of OIC acceptance
- Timely file and pay estimated and employer withholding taxes for the current tax year
Successful Offers Require Personal Attention to Every Detail.
At the Perliski Law Group, we thoroughly evaluate our clients’ financial circumstances to determine whether the IRS will agree to settle IRS debt, the predicted amount of the IRS debt settlement and whether an IRS OIC is the best settlement strategy for each individual client.
We then work closely with clients to gather all of the necessary documentation and develop the strong positions needed to negotiate the best possible IRS debt settlement.
Have a Question?
The Perliski Law Group understands that dealing with the IRS can be stressful. Our attorneys are all admitted to the U.S. Tax Court and have many years of experience working with IRS collections issues. We have broad shoulders; let us step in and negotiate on your behalf. During your free initial consultation, we will explain the options that may be available to you.
“We highly recommend the Perliski Law Group! They worked diligently with us to create an offer in compromise that was accepted by the SBA and the lender. Fair price and very responsive to all our questions and concerns. We couldn’t have asked for more.”