Offer in Compromise
What is an Offer in Compromise?Do I qualify for ˘ on the $?
It is common for a taxpayer to be unable to pay his taxes in full. The Offer in Compromise program for the Internal Revenue Service as well as for various states participating in an offer in compromise program such as AZ, TX, CA, RI, AR (states with offer in compromise) or other entities attempts to bring a business approach to the probability of collection of the assessed tax, penalties, and interest claimed by the Internal Revenue Service or State. When the Internal Revenue Service or State accepts the Offer in Compromise, the underlying taxes, interest, and penalties previously claimed are settled with the IRS or state for the accepted amount. There will be other conditions, such as filing future returns on time, no extensions for filing, and the like, but the core is the IRS or state agrees to accept a lesser amount than claimed.
Why is an Offer in Compromise is accepted?
Theoretically, the Offer in Compromise is accepted because the IRS or state believes the amount settled is better than maybe collecting the same or higher amount at great expense in governmental resources. However, there are many other reasons why an offer might be accepted.
- The government has a legal out when it bungles on tax collection efforts
- Favors are more easily handed out to well connected taxpayers
- The government - particularly the IRS, can appear to be strict in collections, but lenient on offers in compromise, bringing some reality to an otherwise surreal agency
- Genuine taxpayer hardships can be taken into account in settlements.
When is an Offer in Compromise submitted?
Like life, timing is everything. For example, if you will owe the IRS for 2002 and it is already December 2002 you would probably want to wait until you file your 2002 tax return so that amount can also be included in the offer. You want to make your offer while you are working as most from unemployed persons are returned unprocessed with a note: let us know when you go back to work. The official rules are you can submit an offer in compromise at any time. That is true. But not beneficial.
Where is the Offer in Compromise submitted?
Generally, if you have a Revenue Officer on your case, the offer would be submitted to that person. If you do not have a Revenue Officer on your case, the offer would be submitted to the Center defined by the IRS for your residence address. Generally, that is Memphis or Holtsville Centralized Offer in Compromise Center, the choice of which depends on your state of residence.
Who can submit an Offer in Compromise to the IRS?
Any taxpayer with a balance can submit an Offer in Compromise at any time, provided it is not for the purpose of delaying collection efforts. See the following pages for additional information on Offer in Compromise.