One possibility for taxpayers in New England and throughout the US who owe money to the IRS is to enter into what’s called an Offer in Compromise. Offered as a part of the IRS’ Fresh Start Initiative, the purpose of an Offer in Compromise is to settle a tax debt for a lesser amount than what is owed. This option is ideal for those who find themselves in two scenarios: that they either cannot pay the full amount owed, or paying the full amount would cause them financial hardship.
Who Should Consider Choosing an Offer in Compromise?
There are some eligibility requirements to the Offer in Compromise option. Our New England Tax Resolution firm offers free consultations to talk options. You must be sure that all of your accounts are current, specifically your tax filings and payments. Those who find themselves in the midst of active bankruptcy proceedings are not eligible for the Offer in Compromise option. The IRS urges anyone considering this option to first explore other options for repayment.
How the Process Works
An Offer in Compromise begins with a submission to the IRS of a suitable amount. This is done via a number of forms. A package must be ordered for $150. This package includes several forms. The IRS offers step-by-step instructions on their website, as well as a video that outlines how to complete Form 656, which is the Offer in Compromise application form.
It’s important to note that, in addition to the $150 application fee, an initial payment will need to be included with each Form 656 you submit. This initial payment is payable in two ways: via monthly installments or via lump sum.
The Benefits of the Offer in Compromise
This option can mean many significant benefits to the taxpayer, including the fact that you can settle your tax debts once and for all. Some of these benefits include the ability to do something other than file for bankruptcy, which can have lasting effects on your financial standing.
Another benefit is that, while your application for the Offer in Compromise is under review, any efforts underway by the IRS to collect your debt will cease. As well, if there are any tax liens against your personal property, this option could see them completely eliminated.
Expert Advice for Taxpayers
While the Offer in Compromise does represent a welcome solution to the problem of the inability to pay tax debts, experts do warn that taxpayers proceed with caution. The Offer in Compromise option should not be the first step taken when an inability to repay IRS debt is identified.
If at all possible, it’s advised that taxpayers try and identify any potential issues with repayment as early as possible. Doing this will not only allow the taxpayer to take action right away, but will also help them avoid having their wages garnished, liens applied to property, and bank accounts frozen.
Just how much could an individual end up paying should an Offer in Compromise be accepted? Some taxpayers have seen their owed amounts being reduced to pennies on the dollar.
Ready to learn more? Contact Tax Debt Assistance!