How do I submit an offer in compromise to the IRS?

This blog provides a basic overview of how to submit an offer in compromise to the Internal Revenue Service (IRS) for the tax liability due as a part of your federal tax return.  Here is how you can get started:

Determine if you are eligible. There are certain criteria that you as a taxpayer must meet before the IRS will even consider your offer in compromise:

  • You must have filed all the tax returns that you should have filed
  • You must have paid any estimated tax payments due
  • If you own a business and have employees, you must have made all deposits through the current quarter as required
  • You must not be in the midst of a bankruptcy, as part of the bankruptcy process would be resolution of any tax liability

Again, if you do not meet one or more of the above points, the IRS will consider you ineligible for an offer in compromise.

Prepare and submit a complete offer. A complete offer in compromise proposal includes the following:

  • A $150 application fee, and
  • Form 433-A or 433-B, which are for individuals and businesses, respectively, and Form 656.

You must complete each of the applicable forms in full.  The information you will need to complete the forms includes:

  • details about the tax period the offer covers,
  • a summary of your financial position,
  • the reason you are submitting an offer in compromise rather than paying your tax liability in full, and
  • an explanation as to why the IRS should accept less than the full amount of tax due.

Await a response from the IRS. While the IRS is considering your offer in compromise proposal, you must begin to submit payments to the IRS as though they have accepted your offer.  While the IRS considers your offer, they will suspend all active collection activities; however, they may file a Federal Tax Lien against your property while they are considering your proposal.  The IRS would release this lien if the offer is accepted and once you have fulfilled all payments under the offer.

The IRS provides a booklet, Form 656-B, that provides additional details about an offer in compromise.  This booklet is available at http://www.irs.gov/pub/irs-pdf/f656b.pdf.

What if I am not sure what information I should send to the IRS with my offer in compromise application?

Remember that just because you are eligible to submit an offer in compromise proposal to the IRS does not mean that the IRS will accept your proposal.  The length of time of the proposed payments, total payments, and supporting documentation all play a vital role in the IRS’ determination on if the offer is acceptable.  Therefore, it is wise to seek professional help in evaluating your financial position, generating an offer the IRS is reasonably likely to accept, and submitting all requirement documentation.  This type of help is available from a tax attorney.

If you complete the short evaluation form at http://www.offerincompromiselawyer.com/Tax-Relief.php, a tax attorney will be able to review your situation to determine if an offer in compromise is a payment option for which you can qualify.  This review is 100% confidential, free of charge, and does not obligate you to anything more.  Therefore, complete the form and seek professional help today in determining if an offer in compromise is the best approach to address your tax liability.