If a taxpayer qualifies as a low income taxpayer, then the taxpayer is not required to submit a down payment with any proposed Offer in Compromise. The Internal Revenue Code defines a low income taxpayer as individual that makes 250% of the Government defined Poverty Guidelines. This is a difficult threshold for most taxpayers to overcome, but if a taxpayer can quality, then it could lead to a significant initial savings. In order to qualify for low income status, a taxpayer must submit Form 656-A, Income Certification for Offer in Compromise and Application Fee and Payment. This is the same form that needs to be completed for the IRS to waive the $150 application fee for an Offer in Compromise.
An Offer that is submitted without a completed Form 656-A and without the required down payment will not be accepted and will be returned to the taxpayer. The IRS will also reject and return any Offer where a taxpayer has claimed low income status, but is later deemed by the IRS to not qualify for low income status. Therefore, it is important for any taxpayer claiming low income status does a careful analysis to ensure that the requirements are met.
If you would like help with the Offer In Compromise process please fill out our free online evaluation.