Tax Resolution

How Do I Determine My Eligibility for an Offer in Compromise?

An Offer in Compromise is a settlement you reach with the IRS where you agree to settle your tax debt for less than the full amount you currently owe the U.S. government. A tax professional can provide assistance on a number of functions involving an offer in compromise, from how to properly apply for one, eligibility standards, what is considered a fair offer, and how this form of settling tax debt may (or may not) be the most appropriate option for you.

Getting Tax Help for Back Taxes

While the IRS may come across as a ruthless hound that wants to track you down and with no mercy, the reality is they will try and work with you if you work with them. The worst thing you can do is ignore your tax problems. This means that instead of facing the consequences you either A) evade filing for state or federal taxes, or B) avoid paying the taxes owed after filing and ignore any requests from the IRS for final notice.

Panic is always a possibility when you discover how much you owe the IRS in any given year, especially when it is possible you may owe even more in back taxes. However, services dedicated to tax debt relief can get you on the right track.

Is an Offer in Compromise a last resort?

The good news is the IRS cannot come after you legally when you owe taxes but are unable to do so without “creating financial hardships”. The courts protect taxpayers from IRS seizures of personal finances and assets when the taxpayer is open and honest about their financial hardships and inability to pay back taxes.

It is also important to remember that the amount you owe is not due in full. If you are like most people that are unable to settle the tax debt in one transaction, the IRS will establish a payment plan with you. Payment plans are usually straightforward and can take care of the tax debt in a reasonable amount of time. Yet if this payment plan will still create financial hardship, it’s time to consult a tax expert about filing an Offer in Compromise.

How do you know if you qualify for an Offer in Compromise?

The IRS provides a really helpful tool to help assess your qualifications for receiving an Offer in Compromise. You can find out more about eligibility by clicking the link below and filling out the questionnaire:

If after the questionnaire an Offer in Compromise is still a viable option, it is very logical to speak with an tax expert next. You can file for an Offer in Compromise on your own, but for most taxpayers this is a confusing process as they are not educated on the topic enough to understand if the IRS is offering them a fair settlement in return.

What does the IRS consider regarding an Offer in Compromise?

When you apply for an Offer in Compromise, the IRS will carefully review:

●     Your ability to pay back the tax liability in full

●     Current sources of income

●     Expenses, and how that ratio is to personal income

●     Asset equity (do you own a home, car, etc.)

If it is assumed after this assessment that the taxpayer cannot reasonably pay back the tax liability in full, the next step is to designate a partial amount the IRS assumes you are capable of paying back. The partial amount varies on a case-by-case basis.

Submitting a Preliminary Offer

Tax experts can assist you with a preliminary proposal if you want to move forward with an Offer in Compromise after consulting with a professional.

You will need to file the following forms:

●     Form 433-A (OIC) or 433-B (OIC) depending on if you are filing an Offer in Compromise for a business or personal income tax.

●     Form 656 document(s) that lists individual or business tax debt.


Also, a one-time and non-refundable $186 application fee will be needed upfront just to be considered for an Offer in Compromise. The initial payment for each Form 656 is also due.

Levy & Associates can provide tax help for situations that require an Offer in Compromise. Whether you need to know if you are eligible for an Offer in Compromise or ready to pursue with a preliminary offer, we can let you know if it’s the best tax debt solution for your particular situation.

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Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.