Taxation & Estate Planning

Offer in Compromise is the answer for your IRS Problem

By Darrin Mish

Some of the bigger "national" Offer in Compromise companies try to sell everyone an Offer in Compromise. The truth is that not everyone qualifies. There are strict requirements that come into play to determine whether a taxpayer qualifies to "settle for less" than what the IRS says they currently owe.

In a nutshell there is an algebraic formula that comes into play to determine whether or not a taxpayer can get such a "deal." (You knew algebra would finally come in handy right?) The exact nature of the algebra problem changes depending on the type of Offer payout you choose. In short there are three types of Offer in Compromise that are based upon Doubt as to Collectibility. Doubt as to Collectibility means that "it is more likely than not that the IRS will not be able to collect the tax debt within the time frame that they are lawfully able to do so. Normally this time frame is ten years but the ten years can be extended for a variety of reasons including prior rejected Offers in Compromise, filing of Bankruptcies, various administrative IRS appeals and so on. The three types of Offers in Compromise are as follows:

1. Cash Offer - payable within 5 months of acceptance of the Offer in Compromise
2. Short Term Deferred Offer - payable in 24 equal monthly installments
3. Long Term Deferred Offer - payable over the number of months left on the IRS Collection Statute in equal monthly installments.

Watch the video to learn more about Offers in Compromise including the exact algebra problem for each type of Offer in Compromise. I think you learn a lot about filing your own Offer in Compromise!

Full post as published by IRS Problem Solver Blog on August 01, 2008 (boomark / email).