An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or if doing so would create a financial hardship. The IRS considers your unique set of facts and circumstances, including:
- Ability to pay;
- Expenses; and
- Asset equity.
The IRS will approve an offer in compromise when the amount offered represents the most that the IRS can expect to collect within a reasonable period of time. However, the criteria for accepting an offer are strict and it is critical that you have an experienced tax attorney to ensure that your offer has the best possible chance of being accepted by the IRS.
Is An Offer in Compromise An Option For Me?
There are three grounds for submitting an offer in compromise: 1) doubt as to collectability; 2) effective tax administration; and 3) doubt as to liability.
Doubt as to collectability. The vast majority of offers in compromise that are accepted by the IRS are based on doubt as to collectability. Doubt as to collectability exists when the taxpayer cannot pay the full amount of his or her tax liability before the amount of time the IRS is legally allowed to collect that debt runs out. The standard the IRS uses to determine whether an offer amount based on doubt as to collectability should be accepted is whether the amount offered is equal to or greater than the taxpayer’s “reasonable collection potential.” A taxpayer’s reasonable collection potential is determined by the IRS by using a specific formula that includes a combination of the equity of the taxpayer’s assets and the taxpayer’s ability to pay.
Effective tax administration. Effective tax administration is based on the principal that paying the liability would create an unfair economic hardship on the taxpayer or would otherwise be unfair based on the taxpayer’s extenuating circumstances.
Doubt as to liability. Offers based on doubt as to liability are only accepted by the IRS when there is sufficient dispute about whether the IRS has correctly determined the amount owed or has assessed the proper person.
How Do I Approach An Offer in Compromise?
Taxpayers should speak with a qualified tax attorney about their circumstances prior to submitting an offer in compromise. The IRS accepts less than 25% of the offers it receives, and it is very important that taxpayers receive assistance in presenting their financials in a manner that would give them the most benefit. In addition, our tax lawyers will only recommend that you submit an offer in compromise if we believe you will be successful. This is one of the many reasons that our law firm has such an excellent track record in the offer in compromise process.
Why Use PEARSON BUTLER Law for Offer in Compromise?
PEARSON BUTLER Law has Tax Lawyers who are experienced negotiating with the IRS and other tax agencies with Offer in Compromise. In addition, PEARSON BUTLER Law offers additional tax services:
- Tax Court Litigation
- IRS Appeals
- IRS Audits
- Criminal Tax Defense
- Payroll Taxes
- Trust Account Taxes
- Offer in Compromise
- IRS Collections
- Installment Agreements
- Innocent Spouse Relief
- Offshore Voluntary Disclosure and Foreign Bank Accounts
- State Sales Tax Audits
- Tax Planning
- Nonprofit taxation and compliance
Contact an Offer in Compromise Tax Attorney Today
If you would like more tax information on Offer in Compromise, contact a tax attorney at PEARSON BUTLER Law now. Call (801) 495-4104 for a free initial consultation.