As debt accumulates, it can be difficult to know where to turn, especially when the IRS comes knocking. Even with long-term financial planning, you may struggle to overcome your tax debt. If you find yourself in this scenario, consider an Offer in Compromise. This tax resolution could offer you a significantly lower tax liability and fast track you to settle your debts with the IRS.

An Offer in Compromise is essentially a tax resolution that targets individuals who owe extensive amounts of back-payments to the IRS. When they’re unable to meet long-term payment plans, an Offer in Compromise is the IRS’ solution to receive the reasonable collection potential while the individual avoids bankruptcy. 

The basis of an Offer in Compromise begins with the taxpayer and IRS agreeing that the outstanding debt cannot be reasonably paid. Once this is agreed, the individual will make an offer for the reasonable collection amount they can reasonably pay within a specific time frame.

The IRS has established three qualifications a taxpayer must meet for an Offer in Compromise: Debt as Collectability, Debt as to Liability, and Effective Tax Administration. Debt as Collectability is based on the IRS determining that a debt will not be settled by the end of the taxpayer’s statute of limitations. For Doubt as Liability, the IRS will reexamine any audits. If errors on the auditor’s part are discovered, the debt will be lowered.

To qualify for Effective Tax Administration, the taxpayer must prove continuing payments will drive them to financial ruin. The IRS will then do an extensive investigation of assets, investments, properties, and more to determine the validity of this. If they approve, the Offer in Compromise tax resolution is accepted. 

Call Allen N. Davey, LLC, Attorney at Law, CPA at (808) 545-2222 today or visit the website for additional information.