Tax Resolution (Offer in Compromise)

A tax resolution is a special program that the IRS has developed for people to manage their delinquent taxes. It is, in essence, a program that allows a person to renegotiate their delinquent tax amount with the IRS for a more manageable amount, similar to a delinquent tax reduction or forgiveness program. It is designed to help people get up-to-date quicker, if they meet a certain few requirements. But what are these requirements?

Offer In Compromise Qualifying Conditions
To qualify for delinquent tax reduction under the provisions of the offer in compromise, a person must meet one or more of these three conditions:

  1. Doubt as to Liability
  2. Doubt as to Collectibility
  3. Effective Tax Administration

Each of these three conditions come with their own set of paperwork, financial analysis, and much more. The process for filing an offer in compromise can be daunting to do it alone, making it very helpful to hire a tax professional. (The help of a tax professional is not required by law, but is suggested due to the complexity of the process).

1. Doubt As To Liability: Offer In Compromise
Usually, if a person has gotten to the point where they need to file for an offer in compromise, they have had plenty of time to dispute the charges. However, if a person can legitimately prove that they have had no previous opportunities to dispute said charges, they can qualify for an offer in compromise. This qualification requires little to no financial information on the part of the filer, just records of communication, or lack thereof. A person should be very wary though, because if the IRS can prove that they gave the person sufficient notice, then they will still be on the hook for the delinquent taxes.

2. Doubt As To Collectibility: Offer In Compromise
This condition provides that the whole delinquent taxes would never be collectible. In essence, if the person can prove that, without a doubt, there is no possible way to pay off the full delinquent taxes, then they may be able to settle for a smaller amount. It should be known however, that this condition involves a lot of number crunching. A person would have to not only gather all their financial information, but they would also need to be able to prove their inability to pay according to the IRS’s eligibility equation. However, if you can prove through their equation, that you could never pay the amount due, then you are in luck and will be able to negotiate for a smaller amount.

3. Effective Tax Administration: Offer In Compromise
This form of offer in compromise is a good option for those that don’t qualify for the previous two conditions, but still think they won’t be able to pay off the delinquent taxes. In this way it is similar to the doubt as to collectibility. The difference is that, in the effective tax administration they don’t say it would be impossible, but rather that it would put the person and their family under a significant amount of financial stress if they were required to pay the full amount.

In addition to reviewing this list, you may also use the IRS’s free tool to check your qualification- Offer In Compromise Pre-Qualifer.