An Offer-in-Compromise is an agreement between the IRS and the taxpayer that settles the taxpayer’s tax debt and allows the taxpayer to pay less than the full amount that is owed. Whenever you watch TV and you see a commercial where people are claiming they settled their IRS debt for pennies on the dollar, this is what they are talking about.
An offer-in-compromise is difficult to obtain because it is not very often that the IRS allows someone to pay less than their full tax debt owed.
In order to qualify for an offer-in-compromise, you must satisfy the requirements of one of the three types. Doubt as to liability is when the taxpayer and the IRS have a genuine dispute as to the existence or amount of the correct tax debt and therefore the taxpayer wishes to resolve the matter rather than fighting to the death with the IRS.
Doubt as to collectability is when the taxpayer admits to owing the full tax debt, but the taxpayer’s assets and income are so low that there is no reasonable method for the taxpayer to pay off the taxes owed.
The third type falls under effective tax administration. This occurs when the taxpayer admits to owing the taxes and has the income or assets to fully pay, but some reason exists so that if the taxpayer was forced to pay the tax debt, the taxpayer would experience some sort of severe economic hardship that would be unfair or inequitable to the taxpayer.
If you are having tax issues, contact our office at 816-524-4949 or check out our website at Hoorfarlaw.com.