IRS Tax Problems

A Complete Guide to an IRS Offer In Compromise: Common Questions Answered

A Complete Guide to an IRS Offer In Compromise: Common Questions Answered

There are few things more alarming than discovering you owe a significant sum of money to the Internal Revenue Service (IRS). For some people, getting out of tax debt can feel like an insurmountable challenge.

Fortunately, there are options available if you have found yourself struggling with tax problems. An offer in compromise is one appealing way to simultaneously reduce the amount of money you owe to the IRS and quickly resolve your issue so you no longer have to worry about the situation. 

Offers in compromise, though, can be complicated, as the application process is complex and people must meet highly specific qualifications for eligibility. 

Here, we answer frequently asked questions about submitting an offer in compromise to make the process as straightforward as possible for you if you believe you are a qualified candidate.

What are the requirements to apply?

To apply to successfully submit an offer-in-compromise, the IRS states that taxpayers must meet the following requirements:

You're eligible to apply for an Offer in Compromise if you:

  • Filed all required tax returns and made all required estimated payments
  • Aren't in an open bankruptcy proceeding
  • Have a valid extension for a current year return (if applying for the current year)
  • Are an employer and made tax deposits for the current and past 2 quarters before you apply

There is even a pre-qualification tool that allows interested parties to see if they should consider moving forward with offer in compromise proceedings. 

What happens if my application is not approved?

If your offer in compromise application is rejected by the IRS, you have 30 days from the date on the rejection letter to appeal the decision. Instructions for how to do so will be provided within the correspondence. 

The IRS states that in the event that “you agree with the rejection, you can send full payment of your tax debt to avoid additional interest and penalty, or request an installment agreement to pay your tax debt.”

What happens if my application is approved?

If your offer in compromise application is approved by the IRS, you will either be able to pay your debt as a lump sum or in periodic payments over a set amount of time. 

If you wish to pay by mail, send checks to:

Internal Revenue Service

ATTN: OIC

PO BOX 219982

Kansas City, MO 64121

If you wish to make payments on your offer in compromise settlement online, visit the Electronic Federal Tax Payment System (EFTPS).

How do I apply for an offer in compromise?

IRS Form 656 is available online. If your form is approved, you will have officially entered into an agreement with the IRS to settle your tax liability for less than you actually owe. Form 656-B, the Offer In Compromise Booklet, offers assistance during the application process.

If you are experiencing financial hardship, you will also need to fill out Form 433-A and/or Form 433-F to give the IRS a detailed look at your fiscal situation.

Who can help me with an offer in compromise?

If you have plans to submit an offer in compromise proposal to the IRS, it is best to work with a qualified tax professional in your area. Some firms even specialize in this tax resolution option.

If you choose to work with a local tax expert, you will not only have assistance with an offer in compromise, but with any other tax resolution avenues you decide to explore. 

Have you ever entered into an offer in compromise with the Internal Revenue Service?

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Spencer Wilson

Spencer Wilson

Spencer Wilson, EA is a tax preparer based in Long Beach, CA. Spencer Wilson Financial Management Services has been serving the Greater Los Angeles Area and Orange County since 2004. <br /> We began in the heart of Naples in Long Beach and we continue to work hard offering tax preparation and planning, business accounting and bookkeeping and payroll services . <br /> We have helped many different people and businesses succeed financially and take control over their finances.

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