What is an Offer in Compromise? Do You Qualify?

Only two things in life are certain, as the old saying goes; death and taxes. However, while we haven’t found any permanent way to avoid dying, there is a solution for those who are facing a tax debt they simply cannot pay. That solution is called an offer in compromise, and it is an option that every taxpayer should be aware of when facing their debts. Because even if you don’t think you’re going to need it, it’s important to keep your options open for the future.

What, Exactly, Is An Offer in Compromise?

An offer in compromise, according to the IRS, is when a taxpayer is allowed to cover their debt by paying less than the total they actually owe to the IRS. In short, the taxpayer and the IRS come to an agreement where the taxpayer covers at least a portion of their tax debt, and the IRS considers that good enough to bring them up to zero.

If that sounds too good to be true, well, that’s because it’s not an option that’s available to just anyone; you need to meet certain qualifications to pursue this path.

First and foremost, one cannot qualify for an offer in compromise unless they have dutifully filed their tax returns, are in compliance as to any estimated tax payments, and all their information is up to date with the IRS. This is technically something all of us have to do, but the IRS will automatically deny any Offer where the taxpayer is not in compliance. Additionally, this is not an option available to someone who is capable of paying the tax debt that they owe through other means. So, if you have the ability to pay your taxes, but you’re just looking for a way to shave off some of the corners, this isn’t an option for you. For those who are curious about whether they qualify, it’s possible to use the Offer in Compromise Pre-Qualifier to see if this is a course of action you can pursue.

Don’t Go This Route Alone

When it comes to negotiating with the IRS, it’s important to remember that you both have very different goals. You want to get your tax debt covered, while still managing to hang onto the resources you need to live your life. The IRS, however, wants to get as much of what they’re owed as possible. That’s why this process is called a compromise; you’re trying to find that middle ground where you can both walk away feeling like you got at least part of what you want.

If you’re not an expert in tax law, then it really pays to have one on your side during this process. An attorney who is familiar with this process can help navigate through the process to minimize any speed bumps throughout.

To be clear, an offer in compromise is a legal proceeding, even if it doesn’t take place in a civil or criminal court. And while you don’t necessarily need to have a lawyer to participate in the process, it is a good idea to have a tax law expert at your side every step of the way. There are going to be documents to fill out, terms that you’ll need to understand, and negotiations that you’ll have to participate in so that you can get your tax debt wrapped up and declared paid through this process. If you qualify for an offer in compromise, then it’s often a smart decision to pursue it. But if you need someone to help you along that path so you can reach the end, then you should contact us today.