Will the IRS Settle My Tax Debt?
The IRS does have a program whereby you can settle (or “Compromise” as the IRS calls it) your tax debt.
We all dread paying our taxes, right? To offset the burden we face each April, we rely on our employers, or ourselves if self-employed, to withhold or make estimated payments throughout the year in hopes that we don’t owe once that tax return is filed. Even better, for those of who over withhold or qualify for certain credits, a refund from the government is to be expected. However, life doesn’t always provide an easy way to pay our taxes. We may need to pay less throughout the year so that we can cover our immediate needs, and when April rolls around the money just isn’t there to pay over. Or our business is fighting to stay afloat during hard times, making it seem impossible to pay taxes when expected. Believe it or not, the IRS does have a heart, and there are options available to just about everyone who needs a way out.
One of these options, and the one most people are looking for, is the IRS’s Offer in Compromise. You’ve probably heard the commercials or seen the ads online informing the public of the IRS’s “Fresh Start Program” wherein the IRS will settle for pennies on the dollar. What those ads are referring to is the Offer in Compromise. The Offer in Compromise is a settlement offer made by the taxpayer to the IRS offering to pay a lesser amount than owed. If the IRS accepts the taxpayer’s offer, the balance of the taxpayer’s debt is wiped out, and the taxpayer gets a fresh start.
An Offer in Compromise doesn’t work for everybody though, and you should be skeptical of anyone who tries to tell you otherwise. A thorough analysis of your monthly income and expenses as well as your assets is necessary to determine what can be compromised. Each household is different, and each geographical location comes with its own set of standards. It’s important to carefully provide the IRS with all the data it needs to make an informed decision. Informal offers containing estimates and inaccuracies will not be accepted.
I’ve been able to work with the IRS on Offers in Compromise going on 7 years now. I started by working in a tax clinic during law school and ended up at a law firm where I almost exclusively dealt with the IRS on a daily basis. I’ve been able to settle millions of dollars in tax debt for clients. This is no exaggeration; the IRS, when it is provided a good offer and all the information is valid, will often show its compassionate side and forgive tax debt that cannot realistically be paid. I can usually spot a candidate that I think will be successful during a free consultation. In fact, I usually won’t even submit an offer for a client unless I am pretty sure that it will be accepted. Why pay for something that will most likely fail?
The Offer in Compromise is a great tool for dealing for overcoming crushing tax debt. But it won’t work for everyone. However, there are a number of other options for those who won’t qualify for an offer.