When you owe the IRS a significant amount of unpaid taxes, your situation can feel hopeless. After all, you can’t get blood from a stone, and you can’t get money from a depleted bank account. The good news is you may be able to resolve issues involving unpaid taxes without having to take a vow of poverty.
An offer in compromise can enable taxpayers to clear their tax debt while paying the IRS less than the total amount owed in back taxes. The IRS must agree to the offer in compromise, and will consider the following factors when deciding whether to accept such an offer:
- Your ability to pay
- Your household income
- Relevant expenses and obligations
- The value of your assets
No one factor is determinative. In addition, you must be up-to-date with your tax filings and payment requirements. If you are currently going through bankruptcy proceedings, you will not be eligible for an offer in compromise.
Upon acceptance of your offer in compromise, you will be presented with two payment options. You may make your payment in a lump sum. This will allow you to resolve your tax dispute as quickly as possible. However, doing so requires the financial means to make such a payment. The other option is to make monthly payments. The monthly payment option will of course take longer but is usually the better choice for people with a limited income.
The IRS can be stingy when it comes to accepting offers in compromise. You can help strengthen your application by working closely with a skilled professional. You have a limited amount of time to appeal a denied application. You should discuss your options with someone who understands the nuances of tax law.