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Outstanding tax bill? Consider working out an Offer in Compromise

Posted on January 5, 2023

 

If you are worried about paying off a large tax bill, the CPAs at Teipen CPA Group can help ease your mind. We can help you work out something called an Offer in Compromise with the IRS.

Just like this sounds, an offer in compromise (OIC) can be an effective way for individuals and businesses to settle federal tax debt. An established federal program, an OIC allows taxpayers to enter into an agreement with the IRS that settles a tax debt – often for less than the full amount owed.

This type of agreement is an option when taxpayers can’t pay their full tax liabilities or when paying the entire balance owed would cause financial hardship. The goal is a compromise that suits the best interests of both the taxpayer and the IRS.

What to know:

  • Sometimes taxpayers are able to settle for significantly less than they owe, especially if they have low income and few assets.
  • Once the IRS agrees to an offer, you can put much of the stress and worry behind you and begin to pay off the amount owed in workable increments.
  • The current application fee is $205. However, taxpayers who meet the definition of a low-income taxpayer do not have to pay this fee.
  • When reviewing OIC applications, the IRS considers the taxpayer’s unique set of facts and any special circumstances affecting the taxpayer’s ability to pay, as well as:
  • Income
  • Expenses
  • Asset equity

Need more specifics?

Taxpayers and business owners can also review the IRS’s Offer in Compromise Booklet to learn how these agreements work and decide if it could help them resolve their tax debts.

The booklet covers everything a taxpayer needs to know about submitting an offer in compromise, including:

  • Who is eligible to submit an offer
  • How much it costs to apply
  • How the application process works
  • All forms that must be completed as part of the offer in compromise process.
  • Visit IRS.gov Offer In Compromise Pre-Qualifier tool for more information

You can also talk to our CPAs to help guide you through the process and answer any specific tax questions you might have along the way.