Offer In Compromise
Taxpayer's can settle their tax debt for less than the full amount owed. The IRS will accept an Offer in Compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects the ability to collect.
The taxpayer must demonstrate to the satisfaction of the IRS either:
1) an inability to pay the tax; or
2) doubt as to the actual underlying liability.
3) Promote effective tax administration. If there are no grounds for a compromise under 1) or 2) above, a compromise may be entered into to promote effective tax administration when:
a) Collection of the full tax debt will create an economic hardship; or
b) Regardless of the taxpayer's financial circumstances, exceptional circumstances exist that collection of the full liability will be detrimental to the voluntary compliance by the taxpayer; and
c) Compromise of the liability will not undermine compliance by the taxpayer with the tax laws.
If the compromise is completed correctly the tax debt may be settled for 5% to 15% of the total tax debt owed. The success to this strategy is to determine the least amount the IRS will accept before making the offer. There is no "one size fits all." Each case is its own unique case and must be treated as such.
