Taxes are a bummer; everyone knows it. If they weren’t necessary, no one would stand for them. Especially when they have built up, they can be a real source of financial hard-ship. Often-times, the IRS will work with you to lessen the burden; that’s where an “offer in compromise” comes in. Here’s a basic overview of what it is and how it works:
An offer in compromise is a chance to pay off your tax debt for less than the full amount owed. It becomes a viable often when you can’t pay your tax debt, or doing so creates severe financial hardship. There are 4 basic considerations that go into an offer of compromise request: ability to pay, income, expenses, and asset equity. Some people are not eligible for an offer in compromise; for instance, people in open bankruptcy proceedings will not qualify.
When you submit an offer of compromise request, you must choose one of two payments options:
- You can include a lump sum cash payment (of 20% of total offer amount) with your request. If the request is accepted, you will then pay off the rest of the offer in 5 or less payments.
- You can include an initial payment with your offer and create a payment plan. Then, you continue to pay monthly installments while the IRS considers your offer. If the offer is accepted, you will continue your monthly payments until the offer is paid in full.
This is the gist of the process. Here at Don R. Walker, C.P.A., you can get the help you need to get your offer in compromise accepted. We also offer a host of other services. For more information, please give us a call at (817) 905-1040.