IRS Offer in Compromise-Amount Acceptable for Settlement of Tax Debt

Written By: Martha De la chaussee

Tax Resolution Expert

Advertisement via various medium are heard and seen indicating that tax debtors can settle their tax debts for pennies on the dollar or for thousands if not millions of dollars of debt for little money.

Note: The Internal Revenue Service has implemented rules and procedures against tax resolution companies or persons offering these services to advertise using the term, “tax resolution for pennies on the dollar” or anything similar.

Yes, companies and people can negotiate settlements for tax audits to reduce or not include some of the audit penalties, interest and some of the tax calculated to be due. In addition, submitting an offer in compromise to eliminate tax debt by contract by proving that the tax debt was not due via doubt as to collectability offer or unable to pay with a doubt as to collectability offer.

There are also some other types of offer in compromise processes and procedures that account for reasons for accepting an offer in cases where equity in assets are more than what the offer amount collectible via an effective tax administration offer.

In addition, offers with future income collateral agreements, agreements of not allowing for losses in the future, and more.

Offers in Compromise are acceptable according to the cause of the tax debt (fraud and criminal restitution and other types of taxes may not qualify).

Offers in Compromise for Doubt as to liability may not be effective when the tax debtor cannot prove that the debt is not owed or prove that the amount due is incorrect and adjustments are warranted. Such as in cases of an audit. Or, substitute for tax return assessments.

Doubt as to collectability offers in the majority of cases require full disclosure of current financial situation (condition), age, health issues, educational background, prior income levels, potential future income from business or individual assets that cannot be easily attached due to the nature of the ownership of the asset (not from unpredictable sources such as lottery winnings).

The one item that comes to mind as to business asset that cannot be easily seized and sold by the Internal Revenue Service are company ownership interest in a closely held entity, family trust where the tax debtor has some ownership interest and not a trustor, stock ownership co-owned with others, personal or real property co-owned with other non-debtors.

There are ways though that the above types of assets that are tied with others can be attached via seizure and sale of ownership interest and rights. For example, court order requesting partition of the property so the property can be sold with values and ownership rights of non-debtor to be paid to them. While any money owed by the tax debtor is applied to the debtor’s tax balance.

Or, seizure via levy or sale of ownership rights in a trademark, copyright, royalties, trust, estate, and other rights of ownership.

There are requirements for qualifying for an offer in compromise. It is not a taxpayer’s right to get approved for an offer. An offer in compromise must go through various levels of approval depending on the type of offer, amount of tax due and qualifying factors.

I view many comments on Facebook and other social media sites where services for tax resolution is offered via advertisements. Some comments include: “Pay what you owe and stop being a burden to those who pay their fair share”. Well, as indicated above. Not all entities who submit an offer are approved. They must qualify.

Once does not know the circumstances for which a tax is due or why an entity cannot pay. Many offers are accepted due to unforeseen circumstances. Such as, health issues, foreclosures on property that the capital gain is taxable and now the funds and assets are gone to pay the debt. Or, retirement which decreases income and expenses while not being able to pay the tax debt accrued.

These are no excuses. However, the government has authorized that in certain circumstances tax debt can be eliminated or reduced via this procedure.

So, what amount is an acceptable amount to offer to the government for resolution of your tax debt via the offer in compromise program? It depends on the type of offer and in the majority of cases financial condition of the entity and or individuals associated for the debt.

If you need assistance or require additional resources and information go to my website at: www.advocatetaxgroup.com

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