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A Guide to Settling Tax Debt for Less than You Owe

mrobinson | Jul 11, 2011 |

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Do you owe money to the IRS? If so, you know that paying in full is a great way to get rid of this problem. At the same time you know that this also takes a lot of money out of your own pocket. For this reason, you should attempt to settle your tax debt for less than what you owe. This is not always possible, but for some people it does work out. You can get started by learning more about the IRS offer in compromise form.

With an offer in compromise you are offering to pay the IRS less than what you owe. If accepted, you will owe this money. Once paid, your account will be back in good standing.

An IRS offer in compromise is by far the most common settlement method that taxpayers think about. Everybody wants to get away with paying less than what they actually owe. Unfortunately, the IRS only accepts 10 to 15 percent of these offers. Even though it is the one that most people think about, it is also the one that is most difficult to obtain.

Your primary responsible is to use the IRS offer in compromise form to make an offer to the IRS, based on what you think you are able to pay. Obviously, submitting an offer and having it accepted are two different things entirely. When making an offer you must convince the IRS that the number is equal to or greater than what they could collect through forced collections such as a levy.

The IRS offer in compromise form is also known as IRS Form 656 – Offer in Compromise. This is the form on which your offer is made to the IRS. Along with this form, there are others that you may have to complete along the way including: IRS Form 656-A – Income Certification for Offer in Compromise Application Fee and Payment; IRS Form 433-A – Collection Information Statement for Wage Earners and Self-Employed Individuals; and IRS Form 433-B – Collection Information Statement for Businesses.

No matter what, make sure you remit the proper IRS offer in compromise forms. If you don't, you are slowing down the process and making it impossible for the IRS to make a final determination.

Are you having a difficult time deciphering the IRS offer in compromise form? Do you need help filling it out? Most people are new to the offer in compromise process. For this reason, confusion is sure to set in at some point. If you need help, hire a tax professional. An experienced pro can better your chance of settling your back taxes for less than what you actually owe.

The best way to settle tax debt for less than what you owe is through an IRS offer in compromise. Once you complete and send the offer in compromise form to the IRS, there is nothing left to do but wait. If your offer is accepted you can pay what you owe and move on. If your offer is rejected, you will have to consider other payment alternatives.