An Offer in Compromise is an option offered by the IRS for resolving outstanding tax liabilities. Through an Offer in Compromise, an eligible taxpayer can resolve their outstanding tax liabilities for an amount less than the amount of their total liability.

Although you may hear many advertisements regarding “Saving Pennies on the Dollar” and promises of all your tax debts being written off, the actual process of preparing and receiving an accepted offer from the IRS is actually a much more complicated process.

First of all, not all taxpayers qualify for an Offer in Compromise. If you do qualify for an Offer, you may find the process of preparing the required forms confusing and overwhelming.

Some tax tips for successfully preparing an Offer in Compromise include:

1. Making sure you have all required forms.    Along with the actual offer form, you must also attach the required financial forms.  The required form varies depending on whether an individual or business is requesting the offer.
2. Making sure that all tax years with balances are included on the offer.   An offer includes all tax years for which you have liabilities.  All years with balances need to be listed on the offer.
3. Making sure you are in compliance with the IRS.  You must be in filing compliance with the IRS.  All returns with a filing requirement must be filed.  You must also be compliant with proper withholding or estimated tax payments for the current year.  Failure to get into and remain in compliance with the IRS will result in your Offer being returned without appeal
4. Providing proper substantiation of income, expenses, and assets.  For all items reported on an offer, you need to provide substantiation.  For instance, you would want to provide proof of your total mortgage outstanding, along with evidence of your monthly payment amount and proof that it was paid.
5. Making sure your Offer amount matches your RCP.  The IRS uses your RCP (Reasonable Collection Potential) to determine the amount of your Offer.  This is based on a calculation of your remaining monthly income after allowable monthly expenses and the equity in your assets.
6. Including checks for the Offer filing fee and 20% down.  Unless you qualify for an exemption, you must send two checks with your offer, one for the filing fee, and one for 20% of the amount of your Offer.

Although preparing an Offer is a lengthy process, for that those qualify, it is a great option for resolving your tax liabilities with the IRS.

To determine if you may be eligible for the Offer in Compromise Program, please call our office at 877-829-2455 to schedule a initial consultation.