An offer in compromise allows you to settle your tax debt for less than the
full amount you owe. It may be a legitimate option if you can't pay your full
tax liability, or doing so creates a financial hardship. We consider your unique
set of facts and circumstances:
- Ability to pay;
- Income;
- Expenses; and
- Asset equity.
We generally approve an offer in compromise when the amount offered
represents the most we can expect to collect within a reasonable period of time.
Explore all other payment options before submitting an offer in compromise. The
Offer in Compromise program is not for everyone. If you
hire a tax professional to help you file an offer, be sure to
check his or her qualifications.
Make sure you are eligible
Before we can consider your offer, you must be current with all filing and
payment requirements. You are not eligible if you are in an open bankruptcy
proceeding.
Submit your offer
You'll find step-by-step instructions and all the forms for submitting an
offer in the Offer in Compromise Booklet,
Form 656-B (PDF). You can also view the
"Complete Form 656" video. Your completed
offer package will include:
- Form 433-A (OIC) (individuals) or 433-B (OIC)
(businesses) and all required documentation as specified on the forms;
- Form 656(s) - individual and business tax debt
(Corporation/ LLC/ Partnership) must be submitted on separate Form 656;
- $150 application fee (non-refundable); and
- Initial payment (non-refundable) for each Form
656.
Select a payment option
Your initial payment will vary based on your offer and the payment option you
choose:
- Lump Sum Cash: Submit an
initial payment of 20 percent of the total offer amount with your application.
Wait for written acceptance, then pay the remaining balance of the offer in five
or fewer payments.
- Periodic Payment: Submit your
initial payment with your application. Continue to pay the remaining balance in
monthly installments while the IRS considers your offer. If accepted, continue
to pay monthly until it is paid in full.
If you meet the Low Income Certification guidelines, you do not have to send
the application fee or the initial payment and you will not need to make monthly
installments during the evaluation of your offer. See your application package
for details.
Understand the process
While your offer is being evaluated:
- Your non-refundable payments and fees will be
applied to the tax liability (you may designate payments to a specific tax year
and tax debt);
- A Notice of Federal Tax Lien may be filed;
- Other collection activities are suspended;
- The legal assessment and collection period is
extended;
- Make all required payments associated with
your offer;
- You are not required to make payments on an
existing installment agreement; and
- Your offer is automatically accepted if the
IRS does not make a determination within two years of the IRS receipt date.
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