Offer In Compromise Request
If you have been contacted by the Internal Revenue Service (IRS) or South Carolina Department of Revenue (SCDOR) regarding unpaid taxes, penalties and/or interest and you cannot afford to pay the balance due, you may be able to secure an Offer in Compromise.
An Offer in Compromise is a modification of the tax liability and establishment of a payment arrangement; in essence, a legally binding agreement between a taxpayer and a taxing authority whereby the taxing authority agrees to accept as full payment an amount that is less than the amount of the existing liability and the taxpayer agrees to pay the agreed upon amount in one lump sum or as part of a short-term payment plan.
The IRS has discretionary authority to accept the Offer in Compromise if there is a doubt as to whether the IRS could eventually collect the full amount of tax debt or if there is a doubt as to whether the taxpayer is actually liable for the tax debt. The IRS generally will not accept an Offer in Compromise unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential, measured by the taxpayer’s ability to pay and the value that can be realized from the taxpayer’s assets.
The IRS may accept an Offer in Compromise based on three grounds:
- Doubt as to Collectibility: Doubt exists that the taxpayer could repay the tax liability owed within the remainder of the statutory period for collection
- Doubt as to Liability: Legitimate doubt exists that the assessed tax liability is accurate
- Effective Tax Administration: Exceptional circumstances exist that would allow the IRS to consider an Offer in Compromise
If the IRS rejects the Offer in Compromise, the taxpayer has a variety of other options. For example, the taxpayer can appeal to the IRS Office of Appeals, propose an alternative collection method, or seek classification as Currently Not Collectible. On the other hand, if the Offer in Compromise is accepted, the taxpayer must make the payments proposed in the Offer in Compromise and the IRS forgives the remaining amount of the taxpayer’s tax liability. The IRS may revoke an accepted Offer in Compromise if the taxpayer does not file its tax returns and pay its taxes on time for the next five years.
If you or your business (or a former business) owes past due taxes, penalties, and/or interest and you know you could never afford to pay the amount you owe, you are probably a good candidate for the Offer in Compromise program. You may be eligible for the Offer in Compromise program even if you are currently under an Installment Agreement.