5 Important Facts about the IRS’ Offer in Compromise Program


Posted on November 16, 2020 |

If you live in New Jersey and you are behind on your federal taxes, submitting an offer in compromise could allow you to resolve your tax debt without paying the full amount you owe. Before you submit an offer, however, there are some important facts you need to know, and you will want to carefully weigh all of your options with the help of a New Jersey tax defense lawyer.

Here are five important facts about the IRS’ offer in compromise program:

Fact #1: Not All U.S. Taxpayers are Eligible to Submit an Offer in Compromise

Being behind on your federal taxes is not enough on its own to establish eligibility for an offer in compromise. You must also be able to show that either: (i) you do not have the financial resources required to fully satisfy your tax debt; or, (ii) “requiring payment in full would . . . create an economic hardship or would be unfair and inequitable because of exceptional circumstances.” Additional eligibility requirements include being current on your federal returns and not being party to a pending bankruptcy proceeding.

Fact #2: Submitting an Offer in Compromise is Not Easy

In order to submit an offer in compromise, you must complete the required IRS tax forms, and you must also provide documentation that supports the justification for your offer. The required forms include:

  • IRS Form 433-A (OIC) or IRS Form 433-B (OIC); and,
  • IRS Form 656B or IRS Form 656-L.

Fact #3: You Must Make a Non-Refundable Payment When You Submit Your Offer

In addition to submitting the requisite forms and documentation, you must also make a non-refundable payment when you submit your offer in compromise. This payment will consist of a $205 application fee and either: (i) 20 percent of the total amount of your offer; or, (ii) the first of a series of installment payments that you propose to make over a six to 24-month period.

Fact #4: If You Fail to Uphold Your Agreement, the IRS Can Still Come After You

If the IRS accepts your offer in compromise, you will have the opportunity to pay the agreed-upon amount without facing collection action. However, if you miss a payment deadline, the IRS can institute collection proceedings, and it can pursue charges for tax fraud or tax evasion as well.

Fact #5: An Offer in Compromise Can Erase Your Tax Debt for a Fraction of What You Owe

While there are risks associated with not adhering to the terms of your offer (if your offer is accepted), if you pay the amount to which you and the IRS agree, you can erase your tax debt for a fraction of what you owe. As a result, pursuing an offer in compromise is a good option for many taxpayers; and, if you cannot reasonably afford to pay your full outstanding tax liability, you should discuss submitting an offer with a New Jersey tax defense lawyer.

Should You Submit an Offer in Compromise? Discuss Your Options with New Jersey Tax Defense Lawyer Kevin E. Thorn

If you would like to learn more about submitting an offer in compromise to settle your federal tax debt, we encourage you to get in touch. To schedule an initial consultation with New Jersey tax defense lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 201-355-8202, email or contact us confidentially online today.

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