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If you owe taxes that you can not pay, you can file for an offer in compromise.

Use form 656 available at irs.gov

You can represent yourself or seek professional tax representation.

If taxpayers are unable to pay a tax debt in full and an installment agreement is not an option, they may be able to take advantage of an offer in compromise (OIC). Generally, an OIC should be viewed as a last resort after taxpayers have explored all other available payment options. The IRS resolves less than one percent of all balance due accounts through the OIC program.

What is an Offer in Compromise?

An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons:

* Doubt as to liability - Doubt exists that the assessed tax is correct.

* Doubt as to collectibility - Doubt exists that the taxpayer could ever pay the full amount of tax owed.

* Effective Tax Administration - There is no doubt the tax is correct and could be collected but an exceptional circumstance exists that allows the IRS to consider a taxpayer's OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

As the result of the issuance of the revised Form 656, Offer in Compromise (2/2007 revision), a taxpayer is now required to file a Form 656 - L, Offer in Compromise (Doubt as to Liability) when it is believed that the tax liability is incorrect, while Form 656, Offer in Compromise should be filed only when there is doubt as to collectibility that the tax liability could ever be paid in full, or under the basis of Effective Tax Administration (ETA). A taxpayer is no longer able to file offers concurrently claiming both that the tax liability is incorrect along with an inability to pay it.

Form 656, Offer in Compromise (2/2007 revision) also incorporates changes in the processing guidelines as the IRS will no longer investigate an offer for a tax year or tax period that has not been assessed. The IRS will return the offer back to the taxpayer if it is submitted solely for an unassessed tax year or tax period.

Taxpayers should beware of promoters' claims that tax debts can be settled for "pennies on the dollar" through the offer in compromise program.

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Related Questions

What is an IRS offer of compromise?

An offer in compromise from the IRS is when the IRS allows someone to settle their tax debt for less than what is owed. Eligibility requirements for an offer in compromise can be found on the official IRS website.


What is an offer in compromise?

An offer in compromise allows a person to settle their debts for less than the amount they owe. A good time to pursue this would be when you owe debts of a substantial amount.


What is the US Offer in Compromise program about?

The US offer in Compromise program is about helping distressed tax payers help deal with their liabilities by paying a portion of their debt. They analyze each application to make sure each person is worthy of a compromise.


How does the IRS Offer in Compromise work?

The IRS setup the Offer in Compromise system to allow those in financial difficulty a way of contributing towards any tax owed whilst maintaining liquidity. It works by considering all aspects of your financial position taking into account cash, income, debt and assets owned. To apply for Offer in Compromise, please visit the official IRS website and click on the Offer in Compromise Pre-Qualifier.


If you make an offer to compromise with the IRS will it affect your credit score?

Not in itself


When does the IRS accept an offer in compromise?

The IRS accepts an offer in compromise when the amount offered is the most the IRS can expect to receive in payment. The IRS will consider a persons income, ability to pay, assets and expenses.


Where can one find a form for an offer in compromise?

One can find a form for an Offer in Compromise on the Internal Revenue Service (IRS) website. There are different forms for personal and business debts and full instructions are given.


When would the tax office issue an offer in compromise?

The tax office would only issue a offer of compromise under these circumstances, the person had inability to pay, had a low income, had large expenses or had asset equity.


What solution did the great compromise offer?

Peace. No war. Everyone is united again


How can one use a tax offer in compromise?

The IRS may offer tax compromises in order to ease a person's tax debt. They take into account the debtor's ability to pay, their income, and their expenses before a compromise is made.


According to the Internal Revenue Service what does an offer in compromise allow one to do?

An Offer In Compromise is a program hosted by the IRS that allows some of the financially distressed taxpayers to clear up their problems much more quickly than the past.


What did Truman offer as a compromise after Stalin regected Trumans suggestion?

To take the soviet from communism