What is an Offer in Compromise?
An Offer in Compromise can allow a taxpayer with IRS debt to offer to pay what you can afford. Corporations, LLCs, and other entities can also take advantage of Offers in Compromise. If the IRS believes the Offer amount is equal to or more than what the Service could otherwise collect from the Taxpayer it will accept the offered amount to compromise the remaining tax liability. Last year we got an Offer through for a client who did not have any equity in his assets and did not have any income over and above his monthly necessary living expenses. The IRS accepted a onetime payment of $300.00 to compromise over $80,000 in tax liabilities. Tax liabilities that can be compromised include income taxes (1040), payroll taxes (941), trust fund recovery penalties, and more.
$281,000 IRS debt settle for $19,000.
Another example, one recent case involved a client who owned a business and had equity in his home. He was able to demonstrate and the IRS agreed that his monthly necessary living expenses equaled or exceeded his monthly income. In that case, the amount that the IRS determined was collectible was just over $19,000. The IRS accepted the client’s offer of $19,040.00 to compromise over $281,000 in taxes.
I have been doing Offers in Compromises for more than 24 years, essentially since the program first began. Without a doubt, this is one of the most favorable times to get an offer accepted that I have experienced. If you want to explore this option, give me a call.
by Norm Short, J.D., LL.M. Taxation