Everybody wants to reduce their tax bill with the IRS. But you can’t just call the IRS And say let’s make a deal. You have to go through a very specific process. This process is called offer in compromise and the first question is do you qualify?
Everyone wants to settle their debt at a huge discount. It can happen. I have settled debts at less than 1% of what was owed. I have also settled Tax debts At 50%….. And just about everything in between. So why the difference? It depends upon each individual taxpayers situation.
So, do you qualify? Take a look at IRS form 656. You must check the right box or boxes. You have to show the service that one or more of the following conditions apply to you.
1. There is doubt as to whether the IRS can ever collect the entire bill from you Now or in the foreseeable future. The service calls this”doubt as to collectibility”.
2. There is a real doubt as to whether you actually owe the tax debt. The service calls this”doubt as to liability”.
3. You may have the ability to pay the entire debt but due to unusual circumstances Payments of the debt would be “unfair” Or cause “economic hardship”. The service calls this”effective tax administration”.
One other fact to keep in mind. The IRS will not accept an offer in compromise while you are in a bankruptcy.
If one of the above three conditions exist for you you “qualify”
You must then determine how much you’re going to offer. ( more on that in other articles)