What is an Offer in Compromise?

By filing an Offer in Compromise, you are offering to pay the IRS less than the whole amount of your tax debts. The IRS uses its discretion and may accept less than full payment of your tax debt if theres doubt regarding whether the IRS coul d ever collect the total amount of tax debt or if there is doubt relating to whe ther you are actually responsible for the tax debt. Submitting an offer in compr omise is something that you should review with a tax professional beforehand in order to be made fully aware of your rights as a taxpayer. How Do I Sign up for an Offer in Compromise? You will need to fill out Form 656, Offer in Compromise, along with Form 433-A, Collection Information Statement. You must also figure out the payment amount yo u can afford to give the IRS using the Form 433-A Worksheet. What are the Terms and Conditions of the Offer in Compromise Contract? The IRS sets forth all the contractual terms in an Offer in Compromise. In a nutshell, you consent to the following: Pay the offer amount in the Offer in Compromise. File your tax assessments on time and pay your taxes on time for the next five y ears. Let the IRS keep any tax rebates, payments, and credits applied to your tax debt s prior to submitting your Offer in Compromise. Let the IRS keep any tax repayments that would have been due to you in the calen dar year that your Offer in Compromise is authorized. If you dont meet the terms of the offer contract, the IRS can (and probably will) revoke the Offer in Compromise and reinstate the total amount of taxation burde n. What Can I do to Protect my Offer in Compromise from Being Revoked? If your Offer in Compromise has been approved, you have got to make sure the IRS doesnt revoke your offer. At all costs, make certain that you: File your taxes on time for the next five years. If you cant file by April 15th, request an automatic extension. Definitely file y our taxes by the extension deadline. Pay your taxes on time. If you owe, your taxes must be paid in full by April 15t h. Make conjectured payments or extension payments to be sure you dont have a bal ance due. If the IRS revokes your Offer in Compromise, they will reinstate the whole amoun t of your tax liability, add on penalties and interest, and begin aggressive col lection efforts. This is why it is important to seek professional counsel before entering into any type of contract with the IRS. Can I Pay Pennies on the Dollar to Settle my Tax Debts? The marketing slogan, pay pennies on the dollar, is deceptive. In a successful Off er in Compromise, the taxpayer pays less than the total amount of taxes, penalti

es and interest. However, the taxpayer must prove the amount he or she is paying is equal or even more than the reasonable collection potential as decided by th e IRS. The reasonable collection potential, ordinarily speaking, is the IRS most accurate guess about what quantity of money you could come up with in the follo wing 48 months to repay your tax debt. How Many Offers in Compromise does the IRS Approve Every Year? The IRS approves only a minority of Offer in Compromise applications annually. I n 2004, the IRS authorized 19,546 offers, about 16% of the total number of offer s received. As of May 2010, the IRS has accepted about 24% of offers. (Source : Countrywide Taxpayer Advocate, 2011 Aims Report to Congress.) The key to a successful Offer in Compromise is making sure that the IRS can proc ess your application, and that you submit complete backup paperwork to support y our offer. Hiring a professional to do this for you correctly could end up savin g you a fortune in the long run. How Long Does it Normally Take to Get an Offer in Compromise? It will take 1 to 2 years to finish the Offer in Compromise process. The timelin e for an Offer in Compromise looks like this: Preparing the Offer in Compromise forms and backup documentation (1-4 months-wit hout the help of a professional) IRS Processing of your Offer in Compromise (13-18 months) Based on the latest statistical data, the IRS takes a mean of 380 days to proces s an Offer in Compromise application. Your processing time may be shorter or lon ger than this. Is There a Fee for Submitting an Offer in Compromise? The IRS charges a user charge of $150 to process an Offer in Compromise. You hav e to pay this charge whether you prepare the offer yourself or hire a tax profes sional. If you are living below the poverty line, the IRS will waive the $150 ch arge if you submit Form 656-A to ask for a fee waiver. What if I Dont Qualify for an Offer in Compromise? If you dont qualify for an Offer in Compromise, you must consider setting up an i nstallment agreement to repay your tax liabilities. Seeking the help of the righ t tax professional will help you understand all of your options and expedite the settlement of your IRS financial problems. JG Tax Group is one of the countries most qualified and professional tax resolut ion firm. If you are facing IRS tax problems, contact us today and start working on a plan to secure your financial future.