What is an Offer in Compromise
Let me explain what an Offer in Compromise really is. It's a program set up by the Internal Revenue Service (IRS) specifically for taxpayers like you who can't pay the full taxes you owe, or where paying them would cause serious financial hardship. Through this program, you can settle your tax bill for less than the total amount due.
When the IRS decides whether to accept your Offer in Compromise, they examine your specific situation. This includes your income, your ability to pay, your ongoing expenses, and any assets you own. They take a close look to ensure the settlement is fair based on what you can actually afford.
Understanding Offer in Compromise
You need to know that Offers in Compromise are only for eligible taxpayers. To check if you qualify, use the IRS's online Offer in Compromise Pre-Qualifier questionnaire. It starts by asking if you're in an open bankruptcy proceeding, if you've filed all required tax returns, and if you've handled the necessary tax documents if you're self-employed or have employees. Then, you'll enter your zip code, state, county, household size, and total tax debt.
Next, the questionnaire dives into your assets. You'll input your total bank balances, home equity value, stocks, bonds, other financial assets, and any additional assets. After that, provide details on your income from jobs, interest, or dividends. You'll also list your expenses, such as rent, mortgage, and vehicle costs—if you don't have a vehicle, you can include public transportation expenses instead. Once you submit this, the IRS site will tell you if you qualify for an Offer in Compromise. Remember, if you or your business is in an open bankruptcy, you're not eligible to apply.
Alternatives to Offer in Compromise
If you find out you're not eligible for an Offer in Compromise, don't worry—there are other options. You might still set up an installment plan to pay your taxes over time. In this case, the IRS reviews your income, assets, and expenses to set a monthly payment you can manage until your tax liability is cleared. To apply, use the IRS's Online Payment Agreement tool, or submit Form 9465, which is the Installment Agreement Request.
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