Offer in compromise is one legitimate option that is levied by the IRS (Internal Revenue Services). It lets you to resolve your tax debt for a lesser amount than the actual amount that had to pay. This can be considered when you can’t pay that full tax liability or doing so will make you go through financial hardships.
In this case, the taxpayer will need to use the checklist in form 656 that will help her determine if you are eligible for this program. The main objective of this IRS Offer in compromise program is to make this compromise only on the basis of the best interests of both the parties i.e. the taxpayer and the government.
But before you are offered this program, the IRS will consider the following set of facts and circumstances:
- Your ability to pay the debt
- Your income
- Your overall expenses
- Your Asset equity
This offer is not for everyone and therefore you need to make sure to check all the payment alternatives before you submit the offer in compromise.
You are eligible for this only under the following circumstances:
- If you have filed all the tax returns and paid all the estimated amount
- If you are not in an open bankruptcy proceeding
- You need to have a valid extension for a current year tax return
- If you are an employer and made the tax deposits for the current and past 2 quarters before you make an application.
So, if you do not fall under this eligibility and still apply for this program then your application will be returned to you with the fee. You will also be given an option for offer payment that is included in your balance due.
In case you are taking the help of a professional to file this offer, then make sure that you check their qualification before you hire them.