IRS Offer in Compromise

By Houston TX CPA Jim Trippon, on the web at CPAHoustonTX.com

One area my CPA firm in Houston TX gets questions about all the time is the area of an IRS Offer in Compromise. If you turn on the TV almost any time of day, you will see aggressive ads making wild promises about how you can avoid paying the IRS. The reality is that glowing promises made on TV seldom work in the real world. Here is the truth about an IRS Tax Offer in Compromise in Houston, TX.

An Offer in Compromise refers to an agreement between the IRS and an individual taxpayer that settles the current outstanding tax debts for an amount less than currently owed. There are three primary types of Offers in Compromise- Doubt as to collectability, doubt as to liability and effective tax administration.

Doubt to Collectability- If there is reasonable doubt that the individual taxpayer has the capacity now or in the future to pay the current tax liability, this form of an offer to compromise may be a viable option.

Doubt as to Liability- This form of offer to compromise may be an option is there is legitimate doubt that the tax liability is accurate. Examples could include mistakes interpreting the law on the part of the tax examiner, the taxpayer's evidence was not properly considered or new evidence is now available.

Effective Tax Administration- In this instance, there isn't doubt that the taxpayer has the capacity to repay the tax debt or that that tax debt is correct, but rather an exceptional circumstance exists causing the IRS to consider an offer to compromise. Typically, financial hardship or proof that the IRS tax debt collection is either unfair or inequitable must be proven for consideration.

To learn more about how to file an offer in compromise, contact one of our tax professionals.