If you’re facing a massive outstanding tax bill, it’s understandable that you’re worried. It doesn’t feel financially viable for you to pay off all of the money that the IRS says that you owe.
Now, there could be other parts to this equation. Maybe you believe you shouldn’t owe that much money to begin with. Perhaps you believe you’ve already paid money that hasn’t been accounted for. There are a lot of different reasons why the tax bill may be so high, and you need to consider ways to resolve them if you think these issues are present.
But there’s also a chance that you just understand that you do owe those taxes, but you also do not have the money to pay them. Do you have to pay the whole bill or are there ways that you could pay less just to put this behind you?
Using an offer in compromise
You may have options, and one of them is to use an offer in compromise. The IRS will often use these offers to tell you that you can pay a smaller amount and they will forgive the rest of the tax bill.
For instance, perhaps you owe $100,000 but you can only afford to pay $30,000 now. If the IRS accepts your $30,000 as an offer in compromise, they can close that account and you won’t have to pay the other $70,000. Of course, these numbers are just an example of how the process works.
Essentially, the IRS is just trying to figure out what the odds are that they will ever get the money that you owe them. They may take a look at your financial situation and realize that there’s not a realistic chance that you’re going to pay back $100,000 in the near future. While the government would like to collect its full amount of taxes, they’re clearly better off to take $30,000 then to get nothing paid back on that outstanding bill. In this way, the government can benefit from an offer in compromise and you can, too.
Do you qualify?
Not everyone can use an offer in compromise, but this helps to show how important it is to consider all of your options. You need to know what you may qualify for and what next steps to take.