If you owe the Internal Revenue Service a huge amount of money in unpaid taxes, it is possible to negotiate a discount and pay a lesser amount. You can do this by asking for an offer in compromise where the IRS can agree to settle for less than you owe.
You must show the IRS that you are unable to meet your tax obligations or you cannot do so without financial hardship. It is important to note that no one has a right to have their tax arrears reduced, and it is all at the discretion of the IRS. Some of the factors that the IRS considers include:
- Your ability to pay
- Your income and expenses
- Your asset equity
If the IRS reviews and accepts your offer, you can proceed to make the discounted payment as agreed.
Are you eligible for an offer in compromise?
Not everyone can utilize the offer in compromise option when settling tax arrears. To be eligible for an offer of compromise, you must meet some requirements:
- You must not be in an open bankruptcy proceeding
- You should have filed all the necessary tax returns and made all the required estimated payments
- Have a valid extension for a current year’s return
If you are an employer, you should have made tax deposits for the current and previous two quarters before applying
Understand the process before you apply
Before submitting an offer in compromise, you should learn more about the whole process and what to expect. For instance, there is a fair share of paperwork needed. In addition, even when your offer is accepted, there are some guidelines you have to abide by to ensure you are not on the wrong side of the law.
A successful offer can take a significant financial burden off your shoulders. Therefore, it may be advisable to seek legal guidance if you are exploring this avenue of settling your outstanding taxes.