IRS Question Corner … Offer in Compromise & Installment Agreement
Question: I owe a substantial amount in back taxes to the IRS, and the two programs I keep hearing and reading about are the Offer in Compromise and the Installment Agreement. What’s the difference?
Answer: The difference is enormous, and determining which program is right for you will depend entirely on the amount you owe to the IRS and your current financial situation.
No matter which program is right for you, the first step you should take is to see a qualified tax professional. He or she will analyze your previous returns to make sure you are not obligating yourself to pay the IRS even a penny more than you owe. After all, why should you go in negotiating with Uncle Sam holding a hand that isn’t even yours?
Now, here’s the deal on the programs:
The Offer in Compromise is available for taxpayers who, for whatever reason, amassed a serious amount of debt and now lack the financial means to pay it off. Instead of having to chase down the taxpayer for decades on end, the IRS can use the Offer in Compromise program. This allows the IRS and the taxpayer to come to an agreement on a settlement amount that will eliminate the tax debt once and for all. This settlement amount often is for pennies on the dollar, and you should have a qualified tax professional with you to negotiate this.
For those who don’t qualify for the Offer in Compromise, the Installment Agreement allows indebted taxpayers to come to an agreement with the IRS that allows them to pay down their tax debt over time. Think of it like a car payment: a substantial but not life-altering monthly payment that over time will take care of your debt.
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Michael Rozbruch solves IRS problems like yours every day. He is an IRS Problem Solver. For a free, no-risk consultation, please call his office at 818-774-1813.
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