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
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
What is the Timeline?
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.
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.
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.
IRS Tax Settlement Video