How To Qualify For An IRS Offer In Compromise

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You know that the IRS is the government entity responsible for collecting taxes in the United States. The IRS is not just any ordinary department though, it’s the key to financial success and happiness. Unfortunately, if you don’t pay your taxes, you run the risk of dire consequences.

IRS Offer In Compromise

What is an IRS offer in compromise?

If you owe the IRS back taxes and can’t afford to pay the full amount, you may be able to settle your debt for less than what you owe. This is called an offer in compromise (OIC). An OIC is an agreement between you and the IRS that settles your tax debt for an amount that’s less than what you owe. The qualify for an IRS offer in compromise considers many factors when deciding if an OIC is right for you.

The IRS will look at your income, expenses, asset equity, and ability to pay. They’ll also consider your compliance history and whether or not you filed all required tax returns. If the IRS decides that an OIC is appropriate in your case, they’ll send you a letter outlining the terms of the agreement. If you accept the offer, you’ll need to make a non-refundable deposit and then agree to pay the remaining balance in monthly installments. Once you make all of the payments outlined in your agreement, your tax debt will be considered paid in full.

To qualify for an OIC, you must:

  1. File all required tax returns. If you haven’t filed one or more required tax returns, the IRS won’t consider your OIC request until you do.
  2. Make all required estimated tax payments for the current year. If you don’t, the IRS won’t consider your OIC request.
  3. Have paid all federal tax deposits due for the current quarter if you are self-employed or have employees. If not, the IRS won’t consider your OIC request.
  4. Not currently in an open bankruptcy proceeding. You also can’t have filed a bankruptcy petition within the last 180 days that was later dismissed without paying your taxes in full.

Why should you consider an IRS offer in compromise?

If you owe the IRS money and can’t afford to pay your tax bill, you may be able to settle your debt for less than the full amount you owe. This is called an Offer in Compromise (OIC).

The IRS considers several factors when evaluating whether to accept an OIC, including:

Your ability to pay:

The IRS will look at your income and expenses to determine how much you can realistically pay.

Your compliance history:

The IRS is more likely to approve your OIC if you have filed all required tax returns and made all required estimated tax payments.

The reason for your non-payment:

If the reason you couldn’t pay was due to circumstances beyond your control (e.g., job loss, medical bills), you’re more likely to get approved.

Your equity in assets:

The IRS won’t seize assets such as your home or car if doing so would leave you unable to pay for basic living expenses.

 

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