With tax season fast approaching, tax debt is on the minds of many people. One way to settle your tax debt is to submit an Offer in Compromise to the IRS. An Offer in Compromise is a way to settle your tax debt for less than the amount you owe. The IRS will look at your ability to pay the debt, your income and expenses, and your asset equity when deciding whether you qualify. Though it was once difficult to get the IRS to approve an Offer in Compromise, the acceptance rate for 2013 was 41.8%, an all time high.
Settle Tax Debt With an Offer in Compromise
In order to attempt to settle your tax debt in this manner, there are several things you need to do. First, you will need to fill out certain forms with the IRS. You will also need to pay a nonrefundable application fee and an initial payment along with your offer. The initial payment depends on your payment plan. There are two different ways you can pay the IRS. One option is a lump sum payment, where twenty percent of the offer is paid with the application, and the rest is paid in a maximum of five payments after the offer is accepted. A periodic payment is the other option. If you choose to make periodic payments, you will make a payment each month after your initial payment until the debt is paid off. The monthly payments must be made while the IRS is reviewing your offer. Alternatively, if you meet certain low income requirements as set out by the IRS, you will not have to pay an application or initial payment when you submit your offer.
It is important to note that certain things will happen while your application is being reviewed. The IRS may file a Notice of Tax Lien, though other collection activities are suspended. Additionally, the nonrefundable fees and initial payment are applied to your tax debt. If the IRS makes no determination on your case in two years, your application is automatically accepted.
If you have tax debt and want to explore your options with one of our experienced attorneys, please call one of our offices and set up a free consultation.