IRS Offer in Compromise Guidelines and Requirements to Qualify

Many times, taxpayers are in a position in which they do not have enough money to pay their debt. This leads them to consider all the different settlement options. One that is talked about time after time is an Offer In Compromise (OIC). Realize that this form of settlement is extremely rare because the IRS rarely accepts them.

Anyway, when you submit an OIC you are more or less telling the IRS that you will pay your debt, but for an amount that is less than what you actually owe. This may sound like a good deal for you and a bad one for the IRS, but this is not the case. In fact, the IRS is only going to accept this form of settlement if it benefits them as well as you.

There are only three reasons why the IRS will accept an Offer In Compromise. If you do not meet any of them you can forget about this sort of tax settlement. They are:

1. Doubt as to liability. This is when the taxpayer does not believe that they owe the debt to the IRS. Of course, it is your job to prove that you are right. Can you do this successfully?

2. Doubt as to collectibility. If the taxpayer cannot afford to pay their debt this is the reason that is cited. This is the most common of the three reasons for filing an offer in compromise. Again, you have to show proof that you cannot afford to pay your debt. This is not always as easy as it sounds as the IRS will request a lot of documentation.

3. Effective tax administration. The taxpayer has the money to pay the agreed upon debt, but by doing so he will end up in a worse financial position.

Did you know that the IRS has allowed some taxpayers in the past to settle their debt, for as little as one percent of the total? It is very rare but possible. For people facing IRS debt this is very intriguing. But again, you have to meet one of the OIC requirements above or the IRS is going to quickly turn down your offer.

It is very important to know the three grounds for being able to request this type of tax settlement. If you can prove one of the reasons above you have a chance of your offer being accepted.