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What are the Benefits of an Offer in Compromise?

October 15, 2013

Offer in Compromise is an IRS tax debt reduction plan under which taxpayers can get their total tax debt amount reduced so that they can pay the remaining amount to resolve their tax debt. The benefits of Offer in Compromise include resolution of tax debt without the responsibility of paying the full tax debt, avoidance of IRS collection actions, reduction in tax debt and facility to pay in installments.

Tax Debt Reduction
Tax debt reduction is an option available to those taxpayers that are financially incapable of paying their full tax debt amount. Offer in Compromise allows reduction in tax debt to allow taxpayers to pay the remaining amount so that they can resolve their tax debt case. It provides significant relief to taxpayers under tax debt that cannot afford to pay their full back taxes.

Protection from IRS Lien and Levy
The IRS is known to use tax lien to ensure payment of tax debt in cases where taxpayers do not resolve their tax debt for any reason. If the tax debt remains unresolved, the IRS may proceed to sell the seized property and/or assets to fulfill the full or a part of the tax debt. Offer in Compromise provides a way to resolve tax debt without paying the full amount. Qualifying for the payment plan ensures that the IRS will not use collection actions that make tax debt resolution difficult to achieve.

Easy Payment through Installments
Offer in Compromise allows taxpayers the option to pay the reduced tax debt amount in installments. Taxpayers may also pay the amount in a lump sum.

The IRS accepts payment of 20 percent of the total offer amount with the application. Taxpayers must wait for the written acceptance from the IRS before paying the remaining balance of the offer in five or fewer payments.

Under periodic payment, taxpayers may submit their initial payment with their application, and continue to pay the balance in monthly installments until the reduced tax debt amount is fulfilled.

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