What is an “Offer in Compromise” And Why is it An Important Tax Resolution Tool

Understanding Tax Resolution: What is an “Offer in Compromise” and How Can It Help You?  New York City Tax Resolution Attorney Explains

It is said that the IRS is the world’s most powerful debt collector, and that may very well be true.  But if you owe the IRS a large sum of money and you do not think you can pay it, you have options that you may be able to use to resolve your tax issues like an “offer in compromise.”  Talking with an experienced New York City tax resolution attorney should always be your first option.

One tax resolution plan your attorney will discuss with you that is particularly helpful in situations when you owe more than you can pay is called an “offer in compromise.”  This can be a powerful tool for an individual to settle his or her tax debt for less than the full amount that he or she owes.  Essentially, an offer in compromise is an agreement or settlement with the IRS if you cannot pay your full tax liability or doing so would create financial hardship.

The IRS considers this option a way to pay off a tax debt and get a “fresh start.”  But not everyone is eligible.

Eligibility for an Offer in Compromise 

To be eligible to submit an offer in compromise of your tax debt, you must satisfy the following:

  1. You must file all tax returns that you are legally required to file or have filed;
  2. You must have received a bill for at least one tax debt included on your offer;
  3. You must make all required estimated tax payments for the current year; and
  4. You must make all required federal tax deposit is for the current quarter if you are a business owner with employees.

In addition, you must not be in an open bankruptcy proceeding.

Reasons Why the IRS Accepts an Offer in Compromise

The IRS will accept an offer in compromise for certain reasons.  The idea behind an offer in compromise is for the IRS to be able to collect some money from you in a reasonable time period as opposed to not be able to collect any money.  Some of the most common reasons why the IRS will accept an offer in compromise includes the following:

  1. There is doubt as to the tax liability.  This occurs when there is a genuine dispute under the law whether there is a tax debt or the correct amount of the tax debt.
  2. There is doubt as to collectibility.  This means that it is unclear to the IRS that you will be able to fully pay the full amount of money that you owe.  This occurs when the tax liability is greater than the taxpayer’s asserts and income.
  3. Based on effective tax administration, which means the IRS can accept an offer in compromise where payment in full would either create an economic hardship or it would be unfair and inequitable because of exceptional circumstances.

Owe the IRS Money?  Think You May be a Candidate for an Offer in Compromise?  Call SAMUEL & STEIN to Find Out More

There is a lot that goes into tax resolution and it can be a complicated maze with many pitfalls.  Call our experienced attorneys at SAMUEL & STEIN today to learn how we can help you successfully navigate this matrix of tax laws and achieve financial freedom by dialing (646) 681-4193 or use the convenient “Evaluate Now” box on our webpage.  Together we can help answer your questions and protect your rights.

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