Owing the Internal Revenue Service money isn’t something that most people want to do. When you’re in this position, you’re probably ready to get everything taken care of as quickly as possible. This debt quickly becomes a priority because of the steps the IRS can take to collect. These include placing liens on personal property, garnishing wages and intercepting tax returns.
Some individuals don’t have the ability to pay off their entire tax bill right away. When this occurs, there is a chance that they could qualify for an Offer in Compromise. There are specific requirements for doing this, so you must ensure that you qualify and that you’re able to keep up with the terms.
Who qualifies for an Offer in Compromise?
Anyone can submit an application for an Offer in Compromise, but it will only be approved if the IRS believes that the offer is the most they will be able to collect from you within a reasonable amount of time. This means that you typically can’t request one that’s a low-ball offer if you could be able to pay more.
When considering an Offer in Compromise, the IRS considers the equity you have in assets, your ability to pay, your income and your expenses. You need to have the ability to pay the offer that you submit.
In order to apply, you must have filed all tax returns and not have made any estimated payment. You can’t have an open bankruptcy case.
How are payments handled?
When you submit the application for an Offer in Compromise, you have to submit your suggested first payment and the application fee. Neither of these are refundable. If the IRS accepts your offer, you will continue making payments as required by the compromise. There are two options for payment.
Periodic payments are made in more than six payments. Typically, they will last up to 24 months. You will pay one payment per month at a minimum.
Lump sum cash payments are made in six or fewer payments with the first one made with the offer. The initial payment is 20% of the offer total that you included on the application.
Unless you qualify for the Low Income Certification, you will make monthly payments while the IRS evaluates your offer. The IRS has two years to consider the offer before it is automatically accepted.
It is possible that an offer will be rejected. In this case, you have 30 days to file an appeal. This is a detailed process, so you will need to work with someone familiar with the process.