How to Get Your Offer in Compromise Approved
Posted on February 21, 2012 by Admin
What is an Offer in Compromise?
An Offer in Compromise is a document which allows people who are unable to pay their full tax liability due to challenging financial circumstances to pay less than the full amount they owe the IRS. The IRS determines for you how much you can afford to pay them by examining:
- Your sources of income, which determine your ability to pay
- Expenses you have
- Equity of your current assets
The IRS does not allow just anyone to be approved for an Offer in Compromise. This document is to be viewed as more of a last resort.
How does this Document Actually Work?
Basically, the IRS calculates what it calls your “reasonable collection potential.” This is the amount of money they realistically believe they can collect from you in the next two years. In order to qualify for and maintain your eligibility for an Offer in Compromise, the IRS requires you do the following:
- File your taxes and pay them on time for the next 5 years
- Pay the amount the IRS requires of you, if any
- Let the IRS retain all tax refunds you could have received during the calendar year they approve the Offer in Compromise
- Allow the IRS to keep all payments, credits, and refunds you would have received preceding the submission of your Offer in Compromise
Is it Possible to Prepare Your own Offer in Compromise?
You absolutely can prepare this on your own, but your chances of success increase if you have help. Any minor mistake you make can be used against you, and the IRS is not known for its forgiving attitude. An accountant or attorney can help you prepare this document.
For your information, here are some of the documents involved in this process:
- For the self-employed, prepare form 433B, 433A, and 656
- IRS Form 433A and Form 656
- A document indicating the reason you believe an Offer in Compromise is reasonable
You can Try Your Best, But Offers in Compromise Aren’t Approved that Often
If you speak with someone saying they can guarantee you will get your Offer in Compromise approved or that they can get your tax liability reduced to just pennies on the dollar, you are dealing with someone who is less than honest.
It is possible to have your request approved, however, keep in mind that in 2004 the IRS approved just 16% of all offers received!
You may be able to do the job on your own, however, the more help you have, the better chances of your success!
About the Author: Jeff Fouts is a tax-efficiency enthusiast. If you are unable to pay your taxes, learn more about an offer in compromise and how an experienced tax attorney can help you.
