IRS Tax Defense: The Offer in Compromise

If you owe the IRS money from back taxes, you are likely worried about how you will be able to pay them. While the simplest option is to come up with the full amount owed, that is not always possible. To help those who are having trouble, the IRS has a program called an “Offer in Compromise” that can help many taxpayers.

What Is an Offer in Compromise?

An offer in compromise is an option to settle your debt with the IRS for less than you actually owe them. You will still have to pay some of the money, but it can be significantly less than the total balance.

Applying for an Offer in Compromise

If you have a set amount of money that you can pay, you will need to submit Form 656-B to make your offer. This form will provide all the information, including the amount you can pay, to the IRS for evaluation. We highly recommend that you speak to a tax defense lawyer before taking any action, however!

Factors That Are Considered

When applying for an Offer in Compromise, the IRS will look at a number of things when determining whether or not to accept your offer. These factors are typically the following:

  • Equity in Assets – If you have enough equity in assets that you could sell, you may not qualify.
  • Expenses – Your expenses (especially compared to income) will be factored in.  Believe it or not, the IRS does not want to make it so you are unable to pay your bills.
  • Income – Of course, your income will be a major factor.
  • Overall Ability to Pay – Factoring in other things will help them to determine whether or not you will ever be able to pay the debt in question.

Maximizing Approval

Whenever submitting an offer in compromise application, you want to do everything you can to maximize your chances at success. This means taking the time to fill out the paperwork properly, and making an offer that the IRS is likely to accept. Since most people have not made this type of offer before, it is highly recommended to work with an experienced attorney who deals with the IRS on a regular basis.

If you would like help with this process, please reach out to us. We will be happy to review your situation and work with you to obtain the best possible resolution!

Written by E. Morgan Maxwell

E. Morgan Maxwell

Since beginning his own firm, Mr. Maxwell has continued a tax-law oriented practice encompassing a wide range of transactions, planning and dispute resolution. His dispute resolution experience includes involvement at all levels of the Internal Revenue Service (Examinations, Appeals, Collections, Office of Professional Responsibility, the U.S. Tax Court), the Pennsylvania Department of Revenue, the Tax Litigation Section of the Pennsylvania Attorney General’s Office, Pennsylvania Commonwealth Court, Common Pleas Court and local taxing jurisdictions in southeastern Pennsylvania.

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