So many of us would love to use the Offer in Compromise. Paying pennies on the dollar for a fresh, clean slate sounds great! Many tax resolution firms will play on these typical feelings in their advertisements, promoting the Offer In Compromise as a standard resolution option.
The truth is, Offers in Compromise are not a realistic option for most people. The IRS uses taxes to pay for the things that benefit everyone. It’s very important to them that each individual pay their fair share if they are able. Installment agreements are usually the best way to ensure that this happens. However, some people are in such financially dire straits that the IRS would not be able to collect their taxes through installment agreements.
Do you qualify for an Offer in Compromise? Are your circumstances considered enough of a hardship for the IRS to grant you an Offer in Compromise? Below are a couple of examples of Offer in Compromise situations and their outcomes. Names have been changed to protect identity. These examples will help illustrate the right candidate for an Offer in Compromise.
Offer In Compromise Examples
Example #1: Robert lost his W2 sales job in which his income taxes were taken out of his paycheck and sent to the IRS for him. His persistent job search taught him that many sales jobs are 1099. Robert accepted a 1099 sales job and was surprised to see that none of his taxes were being deducted from his new paychecks. Robert didn’t understand that he was expected to set aside the taxes and send them to the IRS himself. When Robert filed his tax return, he owed $24,000. Robert applied for an Offer in Compromise explaining to the IRS that he was new to 1099s and was not familiar with how they work.
Robert’s request for an Offer in Compromise was declined. He’s a healthy 36 year old man with a good paying job. He’s a good candidate for an installment agreement.
Example #2 Helen is 74 years old and is on a fixed income. She has owed back taxes to the IRS for years and is struggling to make the payments on her installment agreement. She is disabled and her husband is deceased. She owns no property and has no savings. Helen is living paycheck to paycheck and the payments on her installment agreement are making it hard for her to buy her groceries. Helen submits an Offer in Compromise.
The IRS accepts Helen’s offer after reviewing her finances. They understand that she has no resources to draw from in order to pay her back taxes. She’s elderly and can’t work. The IRS recognizes that this offer will likely be the best they will be able to do in recovering the taxes she owes.
Is Your Hardship Reasonable Enough For The IRS To Accept Your Offer In Compromise?
In most cases, the answer is no. However, there are several items the IRS will take a look at to make their decision. Consider hiring an Enrolled Agent to help analyze your financial resources and determine a likely decision by the IRS. If an Offer In Compromise is not a viable option for you, the Enrolled Agent will easily be able to present suitable options to you and help you choose the one that makes the most sense for you.
IRS Tax Relief Now
IRS Tax Relief Now offers free initial consultations that will allow you to express the details of your situation to a professional tax advisor. Our tax advisor is trained to ask you the questions that will reveal the information we need to make the right determination for you the first time. Once the information is on the table, the tax advisor will develop a plan of action to help you climb out of the tax hole you’re in. Our Enrolled Agent will negotiate with the IRS to get you the very best results that you qualify for. With over a decade of experience, there’s not much we haven’t seen and we’re happy to put that experience to use in your favor.
Contact us now for your free and confidential evaluation. There is never any obligation or pressure to hire our firm. Our tax advisors are ready to talk to you 24 hours a day, seven days a week. We understand that tax stress doesn’t have business hours and we strive to provide our clients with excellent customer service. Contact us today and sleep better tonight!