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What Is an IRS Offer in Compromise?

Posted by Brandon Keim | Dec 03, 2021 | 0 Comments

When you struggle to pay your tax debt to the Internal Revenue Service (IRS), one of your options could be seeking an Offer in Compromise. How does this option lower your tax liability, and who is qualified to get one?

An IRS Offer in Compromise Can Lower Your Tax Liability

The IRS will accept an Offer in Compromise with you to help you lower your tax debt. When deciding whether you're eligible for one, the IRS looks at your reasonable collection potential (RCP) or your ability to pay off your tax debt based on your current assets and expected future income.

The IRS Offer in Compromise is one way to provide you with a realistic chance of paying your tax burden when you are struggling to pay.

When to Seek an Offer in Compromise

You should only seek an Offer in Compromise with the IRS after you've exhausted all other payment options. The IRS has more than one method for helping taxpayers relieve their tax burden, including installment plans. Look into these options first before asking the IRS for an Offer in Compromise.

Qualifications for an Offer in Compromise

Only certain taxpayers qualify for an Offer in Compromise. Requirements to get an Offer in Compromise include:

  • Your tax returns are up to date
  • You have made your estimated payments
  • You are not in the middle of declaring bankruptcy
  • You are an employer who has deposited federal taxes withheld from your employees' wages

When considering your offer, the IRS looks at a range of factors as well, including:

  • The members of your household

  • Your employment status

  • Your assets (such as vehicles, home loans, retirement accounts, etc.)

  • Your income (including Social Security and pension, rental income, alimony, etc.)

  • Your day-to-day expenses (such as healthcare, public transportation, insurance, etc.)

Do You Need a Tax Attorney?

When asking the IRS to accept your Offer in Compromise, you must assess your tax situation correctly. If you don't, you might end up making an inappropriate offer that the IRS won't accept. Working with a tax attorney helps you state your assets and income accurately and fill out the forms correctly. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options. 

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.


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