You may be familiar with an IRS Offer in Compromise. It is a very popular tax resolution option because it essentially allows you to settle your liability for less than the full amount owed.
However, the IRS actually accepts only a small percentage of offers. Generally, an offer will only be accepted if the IRS recognizes a limited collection potential for the taxpayer.
The IRS will first look closely into the equity in assets that can be liquidated to pay the debt in full. It will then examine the disposable monthly income before making a conclusion that the debt may or may not be collected within a reasonable amount of time.
WHAT IS AN OFFER IN COMPROMISE PRE-QUALIFIER?
To make it easier for a taxpayer to determine whether or not the Taxing Authorities might approve an Offer in Compromise in each particular case, the IRS has introduced a new tool called the Offer in Compromise Pre-Qualifier. This is an online system that includes a detailed questionnaire to determine if you may be eligible for an offer.
WHAT QUALIFIES YOU AS ELIGIBLE?
If you are currently in an open bankruptcy proceeding, have not filed all tax returns or have not met your current tax obligations, you should take care of these problems before filing an Offer in Compromise. If you choose not to, the offer will be automatically denied.
If you are eligible to file, an Offer in Compromise Pre-Qualifier will give you a rough estimate of the amount for which you might be able to settle the debt with the IRS. You will need to be ready to answer some questions regarding your income, expenses and equity in assets.
HOW IS THE SETTLEMENT AMOUNT DETERMINED?
The Pre-Qualifier compares your expenses with the National Standards and makes a determination of the minimal amount of your Offer in Compromise.
It is important to remember that the IRS Offer in Compromise Pre-Qualifier is a computer program and operates with numbers that are plugged into its system. It does not take into consideration your particular circumstances and cannot negotiate with the IRS on your behalf (which is why this tool should only be used as a guide). This is something that only your tax consultant, or Enrolled Agent, can do for you.
HOW SHOULD YOU USE THE PRE-QUALIFIER?
The IRS Offer in Compromise Pre-Qualifier is a very useful tool that can estimate your chances of having your offer accepted, but the best way to determine which tax resolution option the IRS will most likely approve is to consult a tax advisor. In addition to determining the probability for your Offer in Compromise to be accepted, your tax representative can discuss the case with the IRS and, for example, negotiate expenses that the Pre-Qualifier cannot account for.
You deserve to live a life free of tax debt. Now is the time to face your tax debt and begin your resolution.
David Miles, an EA at 20/20 Tax Resolution, discusses the IRS Offer in Compromise as one of the available methods of resolving your tax debt.