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The main challenges of making an offer in compromise to the IRS

On Behalf of | Oct 12, 2023 | Taxes |

People make mistakes related to their taxes all the time. Some of those mistakes are errors in earnest, meaning that someone misunderstood what they had to pay or what credits they could claim. Other times, people engage in tax evasion hoping that they won’t get caught. 

Regardless of the specific circumstances, some taxpayers may find themselves thousands of dollars behind on their income taxes. An offer in compromise is one option for those who owe a substantial tax debt that they cannot currently pay in full.

Many people will find proposing an offer in compromise challenging because of what the Internal Revenue Service (IRS) requires. 

The offer needs to be specific and thorough

Someone proposing an offer in compromise to the IRS will likely need support from a lawyer. They may otherwise risk making mistakes in the process that could lead to the IRS rejecting their offer. 

Offers in compromise may involve a lump-sum payment or a structured payment plan. An offer in compromise has to explicitly outline how someone intends to pay their tax debt. It will affirm someone’s resources and income and then explain how much the individual aspires to pay. People have to pay a reasonable amount of their tax debt based on their circumstances. 

If the IRS believes that the offer is too low or the payments aren’t high enough, they may counter or reject someone’s offer.  People often discover that determining what is a reasonable offer without overextending oneself is the hardest part of making an offer in compromise to the IRS. 

Having the right help when attempting to address some kind of tax controversy can make a big difference for an individual who possibly faces prosecution.