Am I Eligible for an Offer in Compromise?

Taxpayers who are unable to meet their tax obligations to the IRS may qualify for an Offer in Compromise, which allows eligible individuals and business owners to settle their tax debts for less than the full amount they owe. For help determining whether you qualify for an offer in compromise, please reach out to our legal team today.

What is an Offer in Compromise? 

An offer in compromise is a type of agreement wherein the IRS allows a taxpayer to settle his or her tax debt for less than the full amount still owed. It is approved most often in cases where paying off the full amount is impossible or doing so would result in a financial hardship for the taxpayer.  Payments can take either of the following two forms:

• A lump sum payment, which requires 20 percent of the total offer amount to be paid with the offer and the remaining balance to be paid in five or fewer payments within five months; or
• Periodic payments, which require a first payment with the submission of the offer and the remaining balance to be paid monthly over the next six months to two years.

Whether or not the IRS allows a taxpayer to take advantage of this option will depend on a number of factors, including: the taxpayer’s:

• Ability to pay;
• Income;
• Expenses; and
• Asset equity.

In most cases, the IRS will only approve an application for an offer in compromise when the amount offered is the most the agency expects to collect within a reasonable amount of time. Read on to learn more about who is eligible for this repayment plan option.

Eligibility for an Offer in Compromise 

A taxpayer could qualify for the offer in compromise option if he or she:

• Filed all the proper tax returns;
• Has received a bill for at least one tax debt; and
• Made all necessary estimated tax payments for the year.

Furthermore, a business owner who is applying for this program will also be required to make all required federal tax deposits not only for the current quarter, but for the two preceding quarters as well. Those who satisfy these eligibility requirements can begin the application process.

Applying for an Offer in Compromise 

To apply for an offer in compromise, a taxpayer must complete a wide range of forms, including:

• Form 656, which will contain the official offer;
• Form 433-A, which is a collection information statement;
• An initial offer payment; and
• For business owners, Form 433-B.

An offer in compromise request won’t be considered without these documents, the $205 application fee, and the initial payment. If a taxpayer is found ineligible for the repayment plan, the IRS will return the application and apply the offer payment to the balance owed.

Schedule a One-on-One Consultation 

For help determining whether you are eligible for an offer in compromise, please reach out to CPA, former FBI Special Agent, and experienced Florida IRS offers in compromise lawyer Ronald Cutler, P.A. at 386-490-9949 today.

Sources: 

irs.gov/payments/offer-in-compromise

irs.gov/pub/irs-pdf/f656b.pdf