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Offer In Compromise Qualifications
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When considering an offer in compromise it is important to remember that the IRS holds the power of discretion when approving offers.  There are many tax scams claiming they can settle your tax debt for “pennies on the dollar”. You should keep in mind that only the IRS can reduce your tax debts or approve a payment plan.

The best way to determine your eligibility is to understand how the IRS evaluates your financial situation. The IRS uses three main criteria for determining whether your offer in compromise will be approved.

Doubt as to Collectability

The IRS only accepts of offer in compromise if the offer is equal to or greater than the amount that could be collected from you, also called the reasonable collection potential (RCP). The RCP is a measure that determines your current and future ability to pay the debt based on your assets, property and income.  If the IRS doubts that you could ever pay the full amount of tax owed, the offer in compromise will be rejected. If there is no doubt that you cannot, now or in the future, pay for your tax debts, the offer may be accepted. Your future ability pay is only extended through the remainder of the Collection Statutory period.

Doubt as to Liability

The IRS may accept an offer in compromise if there is doubt regarding the liability of your tax debt.  If the IRS feels your tax liability is inaccurate, they  may consider an offer in compromise. Some reasons that there might be doubt as to the tax liability are if the tax records examiner made a mistake, failed to consider all of the evidence of tax liability, or if you can present new evidence to support the doubt as to liability.

Effective Tax Administration

In this instance, there is no doubt regarding your ability to pay or the accuracy of your liability, but you have an extenuating circumstance that prevents you from paying your tax debts. When there is no proof the liability is inaccurate and your offer is less than the (RCP), the IRS may still accept an offer if you can prove paying the debt would create undue financial hardship. This case is rare and typically reserved for those that are experiencing additional circumstances that do not fit the other two criteria.

The nature of the offer in compromise process is very involved. Our firm is dedicated to helping you review all of the qualification requirements and payment options that are available for you. Why fight this battle alone? We can do all of the hard work for you and get you the relief you need!