Offer In Compromise

The Offer-in-Compromise is the Holy Grail of tax problem resolutions because through it a taxpayer may resolve his or her issue and be allowed to pay less than the full amount due.

If a taxpayer has been assessed for taxes that are just too much to handle, for example, there is not enough income to pay the tax, or even to do so over time. Or the taxpayer does not have enough savings or other assets to pay. This is done by a careful and close analysis of a taxpayer’s income, assets, and basic living expenses.

In plain, blunt language, if the tax payer is too broke to pay, the IRS will sometimes agree to accept less than the full amount owed (or “compromise” the debt) and “wipe the slate clean” so that the taxpayer can make a fresh start without an impossible tax debt hanging over the taxpayer forever more.

Also, the IRS will sometimes agree to accept less than the full amount due if there is genuine doubt that the taxpayer actually owes the money.

The Offer in Compromise program is a truly great solution, but only if the taxpayer qualifies for it.

Taxpayers should beware of pie-in-the-sky promises that some tax resolution professionals make.

In fact there are some unscrupulous people who describe themselves as tax resolution specialists who promise a taxpayer that their tax debt will be settled “for pennies on the dollar,” and then take a fee for filing an offer in compromise without determining whether the taxpayer qualifies for this program, or will do so even knowing that the taxpayer does not qualify.

Because there have been a number of self-described specialists who were offering such baseless pie-in-the-sky promises, the IRS issued a consumer alert warning taxpayers to “beware of promoters’ claims that tax debts can be settled for ‘pennies on the dollar’ through the Offer in Compromise Program.” See IR-2004-130.