Understand IRS Offer in Compromise | Flat Fee Tax Service | San Diego
Updated: Apr 17
If you are a financially struggling taxpayer, one of the most stressful financial situations you may face is lacking the funds to pay their outstanding tax bills. Many people, who have a back tax debt with the IRS, understand that tax liabilities supersede all other types of debt and that the federal government (IRS) has the ability to levy and garnish your wages and impose tax liens on those who let their back tax bill go unpaid.
THE IRS ISSUES 3,000,000 (3 MILLION)
LEVIES EVERY YEAR.
An Offer in Compromise is a settlement agreement between the IRS and a financially struggling taxpayer (that would be you) that allows you to pay a lesser amount than what you truly owe. For example, Flat Fee Tax Service has clients that paid as little as $100 on tax debts of $25,000.
NOT EVERY SETTLEMENT IS THE SAME.
THE FINANCIAL FORMULA IS THE SAME.
The IRS Offer in Compromise program is based on a complicated financial formula. Your financial data will not be exactly as it is for someone else, but, the formula is the same.
The IRS Offer in Compromise program is as close to ideal as you, the financially struggling taxpayer will get. It’s important to know how the IRS assesses an individual’s ability to qualify for the settlement plan and what the taxpayer’s responsibilities will be after acceptance of your Offered settlement.
Generally, the IRS will only extend these Offer in Compromise (#IRSsettlement) plans to those who are deemed unable to make a full lump sum payment or carry a liability that is too high to enroll in a payment plan. Therefore, those who owe small amounts (less than $10,000) are unlikely to qualify. Recently, the IRS relaxed its standards to offer more flexibility to taxpayers. The expanded Offer in Compromise program is called the IRS Fresh Start Initiative. The Fresh Start Initiative has made it easier for struggling taxpayers to be accepted.
The IRS, typically, only accepts 34 percent of applications for the program.
WHY IS THAT?
The IRS wants and needs to collect money. Therefore, the IRS will look for any reason to reject an Offer in Compromise. Taxpayers who try and save a few dollars, rather than have a proven tax resolution company prepare the documents, will usually make an error. When you submit a flawed Offer in Compromise, the IRS will return it to you and label it as “unprocessable.” The IRS will not tell you why they rejected your settlement offer.
The tax professionals at Flat Fee Tax Service will only submit settlement offers that we feel will be accepted by the IRS.
We can determine whether or not you are qualified and eligible to settle with the IRS for less during our initial consultation. Although the tax agency may accept a smaller amount than what is owed, they will never accept zero dollars.
Our clients have paid as little as $100 to the IRS in settlement of their tax debt. The IRS will also consider mitigating circumstances that may affect how much you can feasibly pay. For example, if a couple has a child with special needs who cut into a large portion of their income, the IRS may take these costs into consideration when negotiating a payoff amount. The same is true if taxpayers themselves have chronic illnesses or health issues that may hinder their finances or ability to make payments.
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