The IRS Offer in Compromise Program authorizes the IRS to compromise outstanding tax obligations with taxpayers with financial hardship for less than the full tax due.
What this means is that the IRS negotiates a deal with you to pay what you can afford and forgives any remaining balance.
Historically, the IRS discouraged Offer in Compromises.
In 1992, the IRS adopted new policies and procedures to promote taxpayer use of Offer in Compromises and to streamline the handling of cases.
IRS agents are now more lenient and willing to accept Offer in Compromises than in the past.
Individuals, married couples, and business entities, such as corporations and partnerships may file an Offer in Compromise.
Many types of taxes such as personal income taxes, corporate income taxes, estate taxes, and payroll taxes may be compromised.
The Franchise Tax Board also has a similar program for state taxes.
You may negotiate not only the tax but also the penalties and interest.
If you are a taxpayer who is unable to pay the full tax liability due to a financial hardship and you believe that the IRS would not be able to collect the taxes through a collection procedure or where there is doubt about your tax liability the Offer in Compromise program may be the solution to your tax problem.
What's great about this program is that the compromised amount may be paid in one lump sum payment, in installment payments, or through a combination of a lump sum payment and installment payments.
In order to file an Offer in Compromise, you must submit appropriate IRS forms and provide comprehensive financial statements to the IRS.
These forms must be completed correctly in order to increase your chance of negotiating a good settlement amount.