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What Taxpayers Need to Know about Offer in Compromise

October 17, 2013

Offer in Compromise is an IRS tax debt reduction plan for taxpayers that are financially incapable of paying their entire tax debt amount. The four major factors the IRS considers when reviewing an application for Offer in Compromise includes:

  1. Ability to pay
  2. Income
  3. Expenses
  4. Asset equity

If payment of the full tax debt amount forces taxpayers into a financial crisis, the IRS is more likely to award them tax debt reduction.

Streamlined Offer in Compromise
Now, taxpayers can enjoy the benefits of Streamlined Offer in Compromise that requires less evaluation and allows faster resolution of tax debt. The Streamlined Offer in Compromise includes:

  • Fewer requests for additional financial information
  • Requests for additional information by phone (not mail), if necessary
  • More flexibility when considering a taxpayer’s ability to pay

A major advantage of the Streamlined Offer in Compromise is that it has a decreased timeframe of two years to complete the Offer in Compromise process. It also allows greater flexibility in evaluating the financial condition of a taxpayer applicant. More flexibility is allowed in:

  • Determining the equity in assets
  • Determining the allowable living expenses
  • The amount of future income included in the offer

Understanding the Offer in Compromise Process
While an offer is being evaluated by the IRS, taxpayers can expect to see certain actions, including:

  • Extension of the legal assessment and collection period
  • Request for the payments under the agreement
  • Suspension of many collection activities

If the IRS does not accept your offer within two years from the date of the IRS receipt, the offer is considered accepted. Offer in Compromise has various other factors that influence resolution. For best resolution, taxpayers must select the correct payment plan that helps them to resolve the debt quickly and comfortably.

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