An alternative to Offer In Compromise for some taxpayers is filing bankruptcy. The Bankruptcy Code allows for the elimination of tax debt provided that certain qualifications have been met. The standards are the same regardless of whether you file a Chapter 7 or Chapter 13 bankruptcy, and they are as follows:

1. The tax owed must be from a return that was due at least three years prior to the current tax year
2. The tax return must have been filed two years prior to the bankruptcy
3. The tax must have been assessed for at least 240 days prior to filing
4. The tax return in question cannot have been filed fraudulently
5. The taxpayer must not have been determined guilty of a willful attempt to evade the tax owed

Any taxes that do not fall into all of the aforementioned categories are considered priority claims in bankruptcy

When negotiating an Offer In Compromise the IRS has several items that must be included:

1. All of the attachments requested in Form 433 Collection information statement are required. This means that the client will need to submit documents to verify most of the items in the Offer in Compromise.
2. You will be required to submit 3 months worth of bank statements.
3. You will be required to submit verification of the balance owned on any real estate and verification of the amount of the payments on the real estate.
4. You will be required to submit documentation showing the amount owned on vehicles and the amount of the monthly payment
5. If the client has had a previous bankruptcy, the Discharge form must be attached to the front of Form 433.
6. Note in detail any transfers of assets for less than their full value
7. Copy of the Clients most recent 1040 Income Tax Return
8. A bankruptcy analysis
9. Client’s narrative. This is a way to tell your side of the story.