Using an Offer in Compromise to Settle a Tax Bill

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Westlake Village, California, United States of America (Free-Press-Release.com) January 5, 2012 -- IRS Relief With An Offer In Compromise
Do you owe money to the IRS? The Internal Revenue Service allows you to pay your taxes with an offer in compromise in certain cases. Here is the skinny on how it works.

If you apply for an offer in compromise or OIC, you are asking the Internal Revenue Service to accept your income taxes owed for less than the entire amount. However, if your taxes can be paid through any other means, an OIC most likely wont be accepted.

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Using an Offer in Compromise to Settle a Tax Bill

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Once the Internal Revenue Service receives your OIC request, they will base their reply on your collect-ability. The IRS will look at your income, assets and your disposable income after paying bills. Some static allotments are allowed such as food & clothing, car payment, mortgage/rent and many others.

The Internal Revenue Service may accept your offer, and you will have two choices for payment. A lump sum payment agreement allows you to satisfy the tax bill in 5 months time. When you apply for the OIC, you have to enclose 20 percent of the total as the first payment. Most people must add $150 for application fees. Your money is not refunded if the OIC is refused. Instead it is used to pay on your taxes.

If you cannot pay your OIC with the lump sum option, you can choose to pay in monthly installments up to 60 months or until settlement is paid in full. This option also requires you to make your first payment and a one time fee of $150. Whether the agreement is accepted or not, you have to make these payments until you hear from the government.

Not everyone will have to pay an application fee with their offer in compromise forms. If there is sufficient doubt as to whether you actually owe the taxes, you may not need an application fee. Also, if you meet low income guidelines you will not be required to pay a fee. However, you will need to enclose a first payment and file some extra forms and paperwork.

If you owe the IRS a money from back tax, and there is no way that you can pay them, an offer in compromise may be the solution. This allows you to pay the taxes in five installments or monthly payments until it is paid in full. However, there are qualifications and you must not miss any payments. If you are unsure what to do, you should talk to an income tax professional about your situation.

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Using an Offer in Compromise to Settle a Tax Bil

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