Offers in Compromise

When people call about this

What this usually looks like

• You owe more than you could pay before the collection period expires
• Your income covers necessities and little else
• You have been told to try an offer by someone who never looked at your finances
• A firm promised to settle for pennies on the dollar before seeing a transcript

How it actually works

The part that decides the outcome

The IRS has statutory authority to compromise a liability where there is doubt as to liability, doubt as to collectibility, or where compromise serves effective tax administration. Almost every real case runs on the second ground, and it is arithmetic before it is advocacy: reasonable collection potential is built from equity in assets plus a multiple of monthly income after allowable expenses.

Eligibility has gates that have nothing to do with the merits. All required returns must be filed. Current-year obligations must be current. An offer filed before those are true is returned, and the time is lost.

An accepted offer carries a compliance tail. Fall out of compliance during it and the compromised liability can come back in full. That makes an offer the right answer less often than advertising suggests, and the wrong answer expensive.

The engagement

How we work a case like this

1. Test it honestly

Run reasonable collection potential before anything is filed, and say plainly if it does not work.

2. Get compliant

Returns filed, current obligations current — the gates before the argument.

3. File and defend

Full financial disclosure, valuation supported, and the examiner’s questions answered.

Related matters

These rarely arrive on their own

Tax problems overlap. The pages below are the ones that most often belong in the same file as this one.

This page is general information, not advice for a specific situation. Available procedures depend on the actual record and on current law, which changes. Confirm before acting, or ask this office to review your own facts.