Tax problems can happen to almost anyone. Perhaps you got behind on your estimated payments as a self-employed individual, or you withheld too little from your paycheck, and now owe thousands of dollars to the IRS. Whatever the case may be, if you are having trouble paying off your tax debt, you may be able to make an offer in compromise.

An offer in compromise is an agreement between a taxpayer and the IRS to pay less than the full tax liability. To qualify, you must meet strict eligibility criteria. Our pre-qualifier tool can help you determine if you may be able to take advantage of this opportunity.

Few taxpayers qualify for an offer in compromise. Rather than wasting valuable time and money submitting an offer in compromise that will be rejected by the IRS, you can use our tool to find out if you may be eligible for this tax relief. If so, reach out to a New Jersey offer in compromise lawyer for a full evaluation of your case.

What Is an Offer in Compromise?

An offer in compromise is an agreement with the Internal Revenue Service (IRS) to settle your tax debt for less than the full amount that you owe. It may be an option for certain taxpayers who are unable to pay their full tax liability, or if doing so would cause financial hardship. In deciding whether to accept an offer in compromise, the IRS considers a taxpayer’s ability to pay, income and expenses, and asset equity.

The IRS accepts offers in compromise as a way of collecting as much as possible, as soon as possible, while costing the government the least amount to collect the money. It will accept an offer in compromise if the amount represents what the IRS would expect to collect within a reasonable period of time.

Generally, there are three reasons why the IRS may accept an offer in compromise: doubt as to collectability, doubt as to liability, and effective tax administration. In other words, this type of agreement may be made when the IRS does not believe that it would be able to collect the full amount of taxes due when there is a question as to whether the tax is actually owed. In addition, the IRS may accept an offer in compromise when collecting the tax would create an economic hardship or if there are extraordinary public policy reasons to do so.

To make an offer in compromise, you must submit Form 433-A (OIC) (for individuals) or Form 433-B (OIC) (for businesses), a separate Form 656 for each individual and business tax debt, a $205 filing fee, and an initial, non-refundable payment for each Form 656. An offer in compromise will only be accepted by the IRS if you meet the eligibility requirements.  You can check to see if you qualify using Paladini Law’s Offer in Compromise Eligibility Tool.

Using the Offer in Compromise Pre-Qualifier Tool

Our tool is a simple way to determine if you meet the initial qualifications to request an offer in compromise. Importantly, this tool does not predict whether the IRS will accept an offer in compromise for your outstanding tax debt. Instead, it simply tells you whether you are permitted to apply for this type of agreement.

The tool asks you to answer questions in five areas: tax status, basic information, assets, income, and expenses. First, you will be asked if you meet the basic eligibility requirements for the IRS to even consider an offer in compromise. This includes questions about whether you are currently in a bankruptcy proceeding, if you have filed all of your federal tax returns, and if you have made your estimated tax payments.

Second, the tool assesses your current situation. You will be asked to input facts about your current tax debt, where you live, and the most recent tax year that you are attempting to compromise.

Next, you will be walked through your assets, income, and debts. This is designed to determine if an offer in compromise will be accepted based on financial need. You will answer questions about the property that you own, how much you earn, and any debts that you may have. 

Once you have completed this information, the tool will perform calculations based on IRS collection standards. It will then provide you with options for resolving your tax liability based on your disposable income, equity, and allowable monthly expenses. These options may include making a lump sum payment within 5 months, or installment payments over a 6 to 24 month period.

The offer in compromise qualifier tool is only a guide to determine if you may be eligible to make this type of agreement with the IRS. A final determination will be made by your New Jersey offer in compromise lawyer after a full investigation and review of your finances. It can only be used by individuals who reside in the United States. Partnerships, corporations, and people who reside abroad should use the IRS Form 656 Booklet.

The tool isn’t meant to provide legal advice. If you want legal advice on your specific situation, please contact us!

Owe Taxes to the IRS? We Can Help.

We know that it is all too easy to fall behind on taxes. If you have reached the point where you are unable to pay off your outstanding tax liability, an offer in compromise may help you get out of debt. Our eligibility tool can help you figure out if you may qualify for this type of agreement.

At Paladini Law, we are committed to helping our clients resolve a range of tax issues, both with the IRS and with the state of New Jersey. Using our knowledge and experience of tax law, we will work with you to help you achieve the best possible resolution for your tax problems. To learn more or to schedule a consultation, contact us at 201-381-4472, or email us at any time.