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Question: Like others who have written in questions to you, I have significant tax debt. I am interested in the Offer in Compromise option, but you have said one must qualify for this option. What if I don’t qualify?

Answer:  That’s an excellent question — one to which every person who has tax debt and is considering an Offer in Compromise should understand the answer.

You’re right in saying you must qualify for the Offer in Compromise — that is to say, not everyone is eligible. For those who do not know, the Offer in Compromise program allows taxpayers with significant tax debt to negotiate settlement amounts with the IRS that often come to a small percentage of what they owe. Here’s the important part: To qualify for the program, the IRS must believe you do not have a reasonable ability to pay your debt in full, even over time.

This is the situation for many people with tax debt. Their debt may be related to a failed business, poor tax advice, or rising and unexpected costs in their lives, such as medical costs. In short, these are people whose financial situations have changed so drastically they will not be able to pay their tax debt.

But the Offer in Compromise isn’t the only option. For those with tax debt who do not qualify for the Offer in Compromise program, a good option is the Installment Agreement. Under this agreement, the taxpayer works out a payment plan with the IRS that eliminates the tax debt over time. This is similar to a monthly car payment — a large enough payment to pay off a significant debt over time but not so large that it will adversely affect your lifestyle.

Whether you are interested in an Offer in Compromise or an Installment Agreement, you should first consult a qualified tax professional in your area.

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A personal message from Michael Rozbruch, Certified Tax Resolution Specialist:  I handle tax problems and IRS negotiations every day. That’s because I’m an IRS problem solver.  If you have IRS back taxes that worry you, pick up the phone for a free, no-risk tax consultation.  Call my office, Tax Resolution Services, at 1-866-IRS-PROBLEMS (1-866-477-7762) or fill out our online form for a free tax consultation.

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Prior to the most recent changes, offer in compromises are difficult and complex procedures that are more often rejected by the IRS for one reason or another than accepted.

However, news below suggests that while the IRS is not substantially increasing its “acceptance rate”, it is making efforts to turn away less applications solely on the basis of incomplete paperwork.

CCH (http://intelliconnect.cch.com) reports:

Policies for Review of Offers in Compromise Submitted with Insufficient Payments and Paperwork Changed

The director of SB/SE, Collection Policy, issued internal guidance to SB/SE employees outlining procedures for processability of certain offers in compromise. IRM procedures have required that any offer in compromise received without a Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment, and without the application fee and/or the required TIPRA payment, be returned as not processable, regardless of the income reported on the Form 433-A, Collection Information Statement.

The revised procedures will require a review of the Form 433-A on any offer that is received without a Form 656-A and no application fee or less than the required TIPRA periodic or deferred payment and/or application fee. If, based upon the review, the offer meets IRS Low Income Guidelines as defined in Form 656, the offer will be considered processable and will be treated as if the Form 656-A had been included with the offer in compromise. The guidance provides specific procedures and criteria to review and process such applications.

Offer in Compromises can be tricky–don’t risk your chances of being rejected. Make sure that you follow all IRS guidelines for filing and make sure that you qualify before spending time with this process.

If you are unsure about your qualifications, you can consult tax help from a tax attorney, CPA, or Certified Tax Resolution Specialist who have expertise in the area. Chances are, a tax attorney has had much more experience with the offer in compromise application process than any regular taxpayer and hiring one will ensure that you get your maximum chances of approval.

Tax Resolution Services is a team of expert tax attorneys, CPAs, and Certified Tax Resolution Specialists who are here to give you the tax help you need. Call our office today at 1-866-IRS-PROBLEMS for a free tax resolution consultation or visit www.taxresolution.com

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