The Offer in Compromise is an alternative provided by the IRS to help tax payers experiencing financial hardships clear their tax bill at less than the total amount. In order for you to qualify for an Offer in Compromise, there are a few things the IRS first looks into to determine if you are eligible.
When it comes to an Offer in Compromise, your health is put into consideration. If you are suffering from an illness that makes it hard for you to generate a steady income, you could be eligible for this agreement. It doesn’t matter if your problem is related to alcohol or drugs, physical, or psychological. The IRS will be willing to give you an allowance.
The IRS will also consider the health of your dependents. If you or your dependents require expensive monthly payments on medical bills, the IRS will add this to the equation to work out an Offer in Compromise that will be to your advantage. There are cases where a parent had a child with special needs and proved that they provided over half the support needed. In this case, the extra costs were considered and their tax debt was reduced to the amount the parent could handle.
The statute of limitations is another factor that is put into consideration, since the IRS generally has ten years to handle unsettled tax bills. If you are in a financial hardship and cannot pay your taxes, your status will be termed “Currently Not Collectible” for one year, if you have multiple years left before the end of the statute. This means that no action such as levies or intimidating phone calls will be carried out on you. Nevertheless, penalties and interests will still accrue. Once the year ends, the IRS will come back to establish if you are in a position to your debt. If you are financially stable by then, you will be expected to pay what you owe in full or in installments.
The IRS does not look into the statute of limitations if you are elderly, unable to work, and you depend on a fixed income. However, they will not let you off the hook completely. Instead, they will give you an alternative to pay the tax bill at lesser amount.
Your financial hardship situation plays a major role in determining whether you are eligible for an Offer in Compromise. Therefore, when applying for one, make sure you include the above information if it applies to you, so that you and IRS can come to the most appropriate agreement that will fit the needs of both parties.
