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Offer in Compromise

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Offer in Compromise

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 Some offers are not processable, some are rejected, some are withdrawn.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.

  1. This means you need to file all tax returns that should be filed, pay estimated tax and federal tax deposits.
  2.  Next, the IRS will review how good of a candidate you are, how reasonable the amount you offer, and what are the chances of the collectability of the current tax liability. There are also exceptional circumstances, such as a serious illness or if paying the taxes in full will impact your family. The IRS may also allow such living expenses as student loans (federally guaranteed or for post-high school education), in addition to the regularly allowable living expenses. There are also other aspects to be reviewed by the IRS. Such as if collection in full would undermine public confidence that the tax laws are being administered in a fair manner.

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.

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