An offer in compromise is an agreement between a taxpayer and the Internal Revenue Service (IRS) to settle a tax liability for less than the full amount owed. This option is available to taxpayers who cannot pay their tax debt in full or for those who can demonstrate that paying the full amount would result in financial hardship.
To qualify for an offer in compromise, the taxpayer must submit a formal proposal to the IRS that includes detailed financial information, such as income, expenses, and assets. The IRS will review the proposal and may negotiate a settlement amount based on the taxpayer's ability to pay.
It is important to note that not all taxpayers are eligible for an offer in compromise. For example, taxpayers who have not filed all required tax returns, are currently involved in bankruptcy proceedings or are in an open audit or investigation with the IRS may be ineligible.
Additionally, there are potential limitations and exceptions to this option. For example, if the taxpayer has engaged in intentional tax fraud or evasion, the IRS may not accept an offer in compromise.
Further action may be necessary if the IRS rejects the initial offer in compromise proposal. The taxpayer may be able to appeal the decision or enter into a payment plan with the IRS.
It is recommended that taxpayers seek the assistance of a licensed tax professional or attorney when pursuing an offer in compromise with the IRS.
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