Taxpayers who have a tax debt they cannot pay may have heard that they can settle their tax debt for less than the full amount owed. It’s called an Offer in Compromise.
Before applying for an Offer in Compromise, here are some things to know:
In general, the IRS cannot accept a settlement offer if the taxpayer can afford to pay what they owe. Taxpayers should first explore other payment options. A payment plan is one possibility. Visit IRS.gov for information on Payment Plans – Installment Agreements.
A taxpayer must file all required tax returns first before the IRS can consider a settlement offer. When applying for a settlement offer, taxpayers may need to make an initial payment. The IRS will apply submitted payments to reduce taxes owed.
The IRS has an Offer in Compromise Pre-Qualifier tool(link is external) on IRS.gov. Taxpayers can find out if they meet the basic qualifying requirements. The tool also provides an estimate of an acceptable offer amount. The IRS makes a final decision on whether to accept the offer based on the submitted application.
Taxpayers wishing to file for an Offer in Compromise should visit IRS website’s Offer in Compromise page for more information. Their taxpayers can find step-by-step instructions as well as the required forms. Taxpayers can download forms an
ytime at /forms or call 800-TAX-FORM (800-829-3676) and ask for Form 656-B, Offer in Compromise booklet.
THIS ENTIRE REPORT IS BASED OFF THE IRS WEBSITE