Offer in Compromise enables the taxpayers to settle their dues for an amount lesser than the actual amount they owe to the government. This program is developed for the individuals who are unable to pay their Taxes and for those who could get into financial trouble if they paid the outstanding amount. The offer in compromise enables individuals to settle their outstanding tax bill for lesser than the total money they owe.
It is developed by the Internal Revenue Service (IRS). Note that only a few taxpayers that are facing financial struggles and other challenges will qualify for the offer in compromise. IRS will examine the financial condition of the person, their monthly Income, expenses, and assets & liabilities before allowing the person to settle their tax dues for less than the amount they owe to the government.
Taxpayers can also check the eligibility criteria of this offer by attending the pre-qualifier questionnaire online. This gives you a better idea of whether or not you qualify for an offer in compromise. Basically, this questionnaire will ask a few questions to find out if you are eligible for this IRS program. They will ask if you have any open Bankruptcy proceedings and whether you have filed your tax returns. Once you are done answering the questions, you can submit the required personal details, including your name, address, total outstanding tax amount, family members, zip code, state, and more.
Next, you are supposed to share the details of the assets you own. In this step, you will be asked to submit the documents of the assets you own. This includes your Bank balances, savings, home equity, stocks and other securities, and Financial Assets. The IRS will, then, ask you to send the information about your current job and any other source of income (dividend or interest).
Once you have shared all the requested information about your assets, list your expenses. You must mention the amount you spend on consumption, vehicle maintenance and servicing, rent, mortgage, children’s tuition fee, public transportation, and more. The IRS will review this information to decide whether or not you are an eligible candidate for the offer in compromise. Note that the company or an individual that has open bankruptcy proceedings will not qualify for the program.
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For those who do not qualify for the offer in the compromise program, there is an alternative plan. You can pay the taxes in small installments. If you choose the installment plan, the IRS will review your income, assets, and expenses to establish a reasonable monthly amount you could pay for the taxes until the dues get cleared.
In order to apply for this tax installment payment plan, you could use the Form9465 or the online payment agreement platform. You are supposed to submit the application for the tax installment to the IRS to be considered for the payments in installments.