is an offer that an individual proposes to the IRS to accept, in a case the individual owes taxes. Of course, Not every Offer in Compromise is accepted by the IRS. Some offers are not processable, some are rejected, some are withdrawn. Offer in Compromise serves both sides to their advantages. The IRS wants to spend the least amount of resources to collect the money owed.
What are the steps when applying for Offer in Compromise? The first step is Compliance.
You can review the IRS pre-qualifier yourself, on the IRS website. You will have to answer questions regarding bankruptcy, compliance, your living situation, dependents, your income and expenses, and about the value of any assets you own.
For example, if the IRS finds you eligible for the Offer in Compromise you can end up only paying around $2,000 to settle a $12,000 tax liability.
See Form 433-A/B (OIC); Form 656-B, Offer in Compromise Booklet.