Taxpayers who have a tax debt they cannot pay may have heard that they can
settle their tax debt for less than the full amount owed. It’s called an Offer
in Compromise.
Before applying for an Offer in Compromise, here are some things to know:
- In general, the IRS
cannot accept a settlement offer if the taxpayer can afford to pay what
they owe. Taxpayers should first explore other payment options. A payment
plan is one possibility. Visit IRS.gov for information on Payment
Plans – Installment Agreements.
- A taxpayer must file all
required tax returns first before the IRS can consider a settlement offer.
When applying for a settlement offer, taxpayers may need to make an
initial payment. The IRS will apply submitted payments to reduce taxes
owed.
- The IRS has an Offer
in Compromise Pre-Qualifier tool on IRS.gov. Taxpayers can find out if
they meet the basic qualifying requirements. The tool also provides an
estimate of an acceptable offer amount. The IRS makes a final decision on
whether to accept the offer based on the submitted application.
- Taxpayers wishing to
file for an Offer
in Compromise should visit IRS website’s Offer in Compromise page for
more information. There taxpayers can find step-by-step instructions as
well as the required forms. Taxpayers can download forms anytime at www.irs.gov/forms
or call 800-TAX-FORM (800-829-3676) and ask for Form
656-B, Offer in Compromise booklet.
Additional IRS Resources:
- Tax Topic 204- Offers in Compromise
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