An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It's an option if you can't pay your full tax liability or if doing so would cause you financial hardship. What's considered by the IRS in allowing an offer in compromise?
The IRS says that it generally approves an offer in compromise when the amount offered represents the most the agency can expect to collect within a reasonable period. The agency advises that you explore all other payment options before submitting an offer in compromise.
The IRS has posted an OIC Pre-Qualifier that confirms your eligibility and prepares a preliminary proposal.
You'll also find step-by-step instructions in the Offer in Compromise Booklet, as well as Form 656-B for submitting an offer. Your completed offer package will include:
Your initial payment will vary, based on your offer and the payment option you choose:
If you meet the Low Income Certificate guidelines and your offer is being evaluated, there's no application fee or initial payment required. You won't need to make monthly installments either. Your application package will fill you in with more details.
Understanding the process
While your offer is being evaluated:
If your offer is accepted:
If your offer is rejected:
The process can get complex, and an OIC might not be your only or even your best option. If you're having tax problems, work closely with a qualified financial professional.
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