It’s impossible to enjoy a high quality of life when you know you owe the IRS back taxes, especially when the number of fees and the interest attached to the bill keep increasing, making the amount you owe something you’ll never be able to manage. If this is a situation you’re currently in, something you make want to think about is applying for an IRS Offer in Compromise.
What is an IRS Offer in Compromise
For many of the millions of Americans who owe back taxes, the IRS Offer in Compromise is a financial life saver. The Congress approved programs is designed to help people who lack the financial resources to pay their back taxes. If approved, the applicant will often pay less than 20% of what the IRS claims they owe.
Applying for an IRS Offer in Compromise
When you file for an Offer in Compromise, you shouldn’t expect a fast resolution to your back tax woes. According to the IRS, it can take up to two years for a decision to be made.
When you apply for an Offer in Compromise you’ll need:
- A $186 application fee which must be paid whether you’re application is approved or rejected. The only exception is if you’re living below the poverty line, in which case the fee will be waived.
- Extensive financial documentation
- Form 656-A Income Certification
Once the application has been submitted, the IRS will launch an extensive investigation into your current and past financial history. Based on their findings, they’ll determine whether or not you have the financial where with all to pay your back taxes in full, or if your lack the financial resources needed to even work with an installment agreement.
The Terms of the IRS Offer in Compromise
Just because you’ve been approved, it doesn’t mean you have nothing to worry about. If you don’t honor every single aspect of plan, the IRS could still come after you for the original balance of your tax bill. In order to make sure this doesn’t happen you must take several steps.
First, be diligent about not only filing all of your tax returns on time for the next five years, but also making sure you’ve paid any taxes you owe during those five years on time. Pay the amount of back taxes you and the IRS agreed upon when they accepted your Offer in Compromise applications. If you qualify for a tax refund/credit during the five years following the Offer in Compromise agreement, this money will go directly to the IRS rather than to you.
When you decide to apply for an IRS Offer in Compromise, you really need to seek the assistance of a tax lawyer who has handled applications for other clients and has a reputation for working well with the IRS. The reason you need a tax attorney at your side stems from the fact that the IRS is reluctant to approve Offer in Compromise applications. In 2013 the IRS only approved approximately 31,000 of the Offer in Compromise applications it received.