Anyone who owes the IRS back taxes, has probably heard the commercials about settling for less. In order to reach a settlement with the IRS, you have to qualify for the program you are pursuing. The qualifications are based on a financial analysis. The most common reduction in past due tax comes from the IRS’ Offer in Compromise program. In my opinion the Offer in Compromise is the best program offered by the IRS. Once the Offer in Compromise is accepted and the offer amount is paid, your liability goes away as well as the tax lien. There are requirements of course, once the IRS accepts an Offer in Compromise, a taxpayer must file and pay their taxes on time for the following five years. In the event a taxpayer accrues new liability within five years of acceptance, the entire balance that was settled will be re-assessed, less any payments made. It is okay to file an extension to file; you must still pay the tax on time.
Many individuals and tax resolution firms are not clear on the qualifications for an Offer in Compromise. It is a lengthy process and important the taxpayer has a qualified professional compiling, submitting and negotiated their Offer in Compromise.
When a taxpayer has past due tax owed, the IRS reviews the account for maximum collection potential. Ultimately, if you can pay your liability in full through the collection statute, you will not qualify for an Offer in Compromise. Another facet of the Offer in Compromise program is what the IRS considers as allowable expenses; although you may not have any money left over after you pay your monthly expenses, the IRS may not consider all of your monthly expenses as allowable or necessary expenses. If you owe more than $50,000.00 to the IRS and submit an Offer in Compromise, it can take anywhere from 12 -18 months for acceptance or rejection. It is imperative you have a knowledgeable professional compiling your Offer in Compromise.
Brittaney Conley, EA
Insight Tax Group, LLC