Do You Owe Money to the IRS? Help is Available.

So, the dreaded news is received – you owe the IRS.  What to do? 

Fear not; there is help available.  It is called an offer in compromise and may help some taxpayers.

An offer in compromise is an agreement between the taxpayer and the IRS that settles a tax debt for less than the full amount owed.  Paying the full amount would create a financial hardship for the taxpayer.  The goal – a compromised amount in the best interest of both the taxpayer and the IRS. 

So, if you are unfortunately in this situation, what are your chances?  The IRS reviews applications based upon the taxpayer’s unique set of facts and special circumstances as well as income, expenses and asset equity.  This is all further detailed in the Offer In Compromise Booklet available on irs.gov.  The booklet covers who is eligible to submit an offer, the cost involved and how the application process works.  The required application forms are included in this booklet.  Currently, the application fee is $205, but, if the taxpayer meets the definition of a low-income taxpayer, the fee may be waived. 

The taxpayer must have filed all required tax returns. 

If you are in an open bankruptcy proceeding, you are not eligible for an offer in compromise. 

Payment options are available by way of a lump sum cash payment or periodic payments.  

If you owe money, visit irs.gov and search for offer in compromise.  You will be able to easily determine if you are eligible to apply.  If not, then by all means, apply for an agreement for a payment plan to pay off your balance over time. 

Don’t ignore a tax liability or the IRS could proceed to seize your assets.  This can result in financial accounts being frozen, your residence being seized, etc.  Don’t become a victim to taxes owed.  Take action one way or another to resolve the issue.

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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