Eligibility for an Offer In Compromise
The Offer In Compromise Guide can be viewed in full at: Offer In Compromise Guide
For those individuals or small- and medium-sized businesses floundering on their tax payments—income taxes, payroll taxes, interest, or penalties—to the IRS. An Offer in Compromise comes as a boon to these people and enterprises.
An Offer in Compromise allows you to come to an agreement with the IRS where you only pay a partial amount of the total back taxes due. A taxpayer may also invoke the Offer in Compromise in situations where there is a dispute with the IRS regarding the amount owed. This Offer is by no means, a tax reprieve but an effort to arrive at a resolution that suits the interests of both the Internal Revenue Service and the taxpayer.
So what are the terms and conditions of eligibility for Offer in Compromise? If meet the following criteria you are eligible to file for an offer in compromise (note these requisites do not ensure acceptance):
- You have filed all the requisite federal tax returns
- You are up-to-date on his estimated tax payments or withholdings on income tax
- You are able to present supporting documentation, which includes copies of form 433A and/or form 433B; bank statements and pay slips from the previous three months; copies of the most recent mortgage statement, retirement account statement, brokerage documents, and all information pertaining to long-term investments; a statement listing the household expenses for the last three months; and any documents relating to the appraisal of real estate and vehicular possessions (assets)
- You neither are actively involved in a bankruptcy case nor do you have any suit pending
- You have paid the Offer in Compromise application fee of $150 (there is the possibility of waiving this fee, you’ll want to submit the fee waiver if you are eligible)
Additional requirements for a business taxpayer:
- You have filed and paid employment tax returns on time in the previous two quarters
- You are up-to-date on the payroll tax deposits for the current quarter
You are also required to filed Form 656 & provide supporting documents. Individual tax payers are required to complete the Form 433A, and business tax payers are required to complete the Form 433A and Form 433B.
To Better Your Chances
Consult with a tax professional that has experience with Offers of Compromise. If you file without ensuring that you meet the base eligibility, you’ll likely not gain an offer and you’ll reset the 10-year statute of limitations on tax debt.