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OFFER & COMPROMISE:
If
taxpayers are unable to
pay a tax debt in full
, and an
installment agreement
is not an option, then they may be able to take advantage
of the offer in compromise (OIC) program. Generally,
the OIC program should be viewed as a last resort, after
taxpayers have explored all other available payment options.
The IRS resolves less than one percent of all balance
due accounts through the OIC program.
What
is an Offer in Compromise?
An offer in compromise is an agreement between a taxpayer
and the IRS that resolves the taxpayer's tax debt. The IRS
has the authority to settle, or "compromise,"
federal tax liabilities by accepting less than full payment
under certain circumstances. A tax debt can be legally
compromised for one of the following reasons:
- Doubt
as to Liability - Doubt exists that the assessed tax is
correct.
- Doubt
as to Collectibility - Doubt exists that you could ever
pay the full amount of tax owed.
- Effective
Tax Administration - There is no doubt the tax is correct,
and no doubt that the amount owed could be collected,
but an exceptional circumstance exists that allows the
IRS to consider a taxpayer's OIC. To be eligible for a
compromise on this basis, the taxpayer must demonstrate
that collection of the tax would create an economic hardship
or would be unfair and inequitable.
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