Basic Information about Making an Offer in Compromise to the IRS

While many people who owe substantial amounts in unpaid taxes to the IRS or who have not filed a tax return in years have heard of the strategy of submitting an offer in compromise to the IRS, most taxpayers only have limited knowledge of what an offer in compromise entails.  While in theory the IRS may accept far less than what you owe if your offer in compromise is accepted, there are potential drawback to making an offer in compromise so it is a risky proposition to attempt to undertake this approach to your tax problems without legal advice from an experienced tax attorney.

Louisiana Tax Attorney Paul A. Grego can evaluate your outstanding tax obligation, available assets that the IRS will consider and income so that he can advise you on what type of offer in compromise might be accepted by the IRS.  Mr. Grego also can advise you regarding the potential disadvantages of an offer in compromise that often make it inadvisable to submit such a request unless it is reasonably likely to be accepted.

The IRS will require exhaustive disclosure regarding your sources of income, financial liabilities and assets.  Those who prepare an offer in compromise often are required to provide boxes of financial documents that include bank statements, pay stubs, vehicle title documents and a wealth of other documents.  While the hassle and inconvenience of tracking down and submitting these documents can be a challenge, the bigger issue is that providing all of this information may make it easier for the IRS to use oppressive collection tools against you if the offer is rejected.  Mr. Grego can advise you about the specific risks and likelihood of success in your particular situation.

There are specific procedures that must be met to have a reasonable chance to have the IRS consider your offer in compromise.  Guidelines of the IRS provide that an offer in compromise must be equal to the

“realizable value” of your assets plus the amount that the IRS could collect from future income.  If you plan to offer five payments or less within five months, you must submit a twenty percent payment with your Form 656 and a Collection Information Statement (Form 433-A).  If you live in a state with community property law and you are married, the IRS will also request financial information of your spouse.

If your offer in compromise is rejected, Mr. Grego can still assist you in negotiating a potential settlement.

If you have questions about an offer in compromise, you should contact experienced Louisiana tax attorney Paul A. Grego.  We offer a free initial consultation so that we can answer your questions and provide an initial assessment of your situation.  Call us today at 504-302-4949 or email us.