Offer in Compromise

An Offer in Compromise is a tax relief solution where the IRS agrees to allow the taxpayer to settle their tax debt for less than what they owe under specific circumstances. This is an excellent option for reducing your tax debt if you qualify- the average savings for those who qualify is an 88% off of their original tax amount. This means that those who qualify, on average, pay only 12 cents of every dollar owed to the IRS.

However, 75% of people who apply for Offer In Compromise are rejected by the IRS. It is advised that you seek professional tax relief help when filing for this tax relief option. A tax expert can help decide if an Offer In Compromise is right for you and, if so, help increase the chance of your offer being accepted.

How do you qualify for an Offer in Compromise?

  • First, you must have filed all of your tax returns. The IRS will return all Offer In Compromise applications if the taxpayer has not filed all required tax returns.
  • You must be unable to pay your full tax debt or paying your full tax debt must cause you a financial hardship.
  • Your inability to pay or financial hardship must fit one of these three categories:
    • Doubt as to Liability: You can show that you do not actually owe the tax debt.
    • Doubt as to Collectability: You can show that there is little chance of you paying the total tax bill due to the circumstances of your income, living expenses, and asset equity.
    • Effective Tax Administration: You can show that, while you do owe the full amount and the amount can be collected, collecting the full tax amount from you would create an economic hardship or would be unfair because of exceptional circumstances.

Once you qualify for an Offer In Compromise, there are two ways to pay:

Lump Sum Cash: You submit an initial payment of 20% of your offer amount with your application. Once you receive written acceptance of your offer, you then pay the remaining balance of the offer in five or fewer payments.

OR

Periodic Payment: You submit your initial payment with your application. You pay your remaining balance in monthly installments while the IRS is reviewing your application. Once your offer is accepted, continue to pay your monthly installments until your payment is complete.

It’s Important to Know:

  • An offer in compromise is not for everyone. This is a complicated tax relief option with a low acceptance rate by the IRS. It’s best to consult with tax relief experts like those at Vanguard Tax Relief to make sure you’re qualified and to help you submit your forms and prove correctly.
  • If your offer is not accepted, you can appeal the decision within 30 days of receiving written notice of rejection.
  • If you fail to complete payment as agreed upon, your Offer In Compromise will default and the IRS can collect the original tax amount owed with penalties and interest.

An Offer In Compromise is exceptionally difficult to get approved. Don’t risk having your Offer in Compromise denied because you didn’t submit your paperwork and evidence correctly. Consult an expert like those at Vanguard Tax relief to make sure you’re taking the proper steps toward getting your request approved.  

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