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IRS Tax Settlement Offer in Compromise

Tax Settlement (Offer in Compromise)

Southern California Debt Settlement Attorneys

If you owe income taxes, there is a method for settling the amount you owe known as "Offer in Compromise." The federal and state taxing entities created this process by which taxpayers who are unable to pay their tax liability can pay a fraction of the amount owed, much like credit card settlement. However, certain conditions are required for success (see below). Much like credit card settlement, when negotiating an Offer in Compromise, we will contact the IRS or state tax board on your behalf and offer a lesser amount than your liability (the amount you owe).

Is This a Good Option for Me?

The governing entities implemented the Offer in Compromise program for taxpayers who do not have the income or assets available to pay their liability. The IRS or the state taxing authority will consider your full financial situation when determining whether to accept an offer. Thus, it is important to hire an attorney who is experienced in gathering the appropriate information to present to the taxing authority along with the offer.

This process is most often successful when the taxing authority has significant uncertainties about the taxpayer's ability to pay the amount owed before the statute of limitations for collectability expires. Sometimes, the taxing authority will settle where the amount owed is in controversy. Finally, the taxing authority may accept an Offer in Compromise when there are exceptional and extreme circumstances present. Because these scenarios are uncommon, it is important to consult an experienced attorney if you believe that you would qualify.

Do I Qualify for Offer in Compromise?

Unfortunately, most people do not. As mentioned above, there are very few circumstances under which an Offer in Compromise will be accepted. Unlike many firms who take on clients who they know will not qualify for Offer in Compromise; we will go through your full financial situation during our free consultation before accepting you as a client. Client satisfaction is of the utmost importance to our firm, thus, we only accept clients for whom we believe we can get results.

When considering whether you qualify for Offer in Compromise, we will gather information regarding your income, assets, expenses, total debt, and other hardships. Hardships may include extreme medical bills, divorce, loss of employment, or unforeseen circumstances. Please do not hesitate to call or contact our office if you think that you might qualify for Offer in Compromise.

What is the Timeline?

  1. Initial Consultation: As mentioned above, we will only accept clients for whom we believe that we can successfully obtain an Offer in Compromise. If you believe that you may qualify, please call or contact our office to begin the process.
  2. Application: Taxing authorities have a standard application for the settlement process. We will gather information from you and assist you in filling out the application form. It is important to work with us in preparing this application as we will you present best financial picture to qualify for the Offer in Compromise. After the application is complete, we will submit it to the appropriate authority, and contact them to make sure it has been received and is being processed accordingly. It is a lengthy process to confirm receipt of this application (up to 2 months), so we will continue to contact the authority throughout this time period.
  3. Approval: After the application receipt is confirmed, we will remain in contact with the taxing authority to ensure that the appropriate steps are taken for approval. This process can take up to one year to complete. If the taxing authority ultimately approves your application, there will be three payment options: lump sum, a short term payment plan, and a deferred payment plan.

Recent Changes in OIC

In 2012, the IRS increased taxpayers' chances of a successful Offer in Compromise by making the qualifications for acceptance more flexible.* The changes allow taxpayers to solve their tax issues in a shorter period of time.* The changes included a revision of the future income calculation (looking less far into the future) and a more generous living expense allowance.* For example, taxpayers may now include credit card payments and bank fees in their allowable living expenses.*

* IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start. Internal Revenue Service. May 21, 2012.


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