Contrary to popular belief, the IRS wants to work with taxpayers. Owing the IRS money can be intimidating, but you have options. One option when you owe back taxes, is to try to negotiate less than the total amount owed. This is called an offer in compromise, and can be an excellent way for you to catch up financially and move forward with your life.
In some cases, you won’t be able to pay all the taxes you owe. If you can prove to the IRS that you do not have the ability to pay your owed taxes within 10 years, the offer in compromise could be worth trying. Tax Attorney, Todd Unger was recently quoted in a New York Times article that dealt with the IRS and its offer in compromise program. Unger stated that “when the IRS accepts an offer it can be the deal of a lifetime for the taxpayer needing assistance.”
Understandably, the IRS is not simply going to shrug, say OK, and take the lesser amount. When submitting your offer, the IRS conducts a thorough investigation of your ability to pay back the full amount of taxes owed. If you can realistically pay your full tax debt, the IRS will expect you to do so. The IRS will investigate your disposable income, assets, and liabilities to ascertain your ability to pay. The amount that you say that you can pay and the amount the IRS believes you can pay can be a point of contention.
When the IRS accepts an offer the amount negotiated upon must be paid within 5 months after acceptance or within 24 months. The offer amount doubles if you are paying the tax deal within 24 months. Therefore, having the financial wherewithal to pay your offer is essential when analyzing the viability of a tax settlement.
For those who qualify, an offer in compromise can reduce the tax amount and can mean a light at the end of the tunnel, helping you get back on track financially. A tax attorney can help you negotiate and structure a deal that you can afford to pay.