If you haven’t paid taxes in years, you could owe an incredible amount of back taxes that may not actually be affordable to you. This often concerns people because they’re worried about how they’re supposed to come up with this much money and what the government is going to do if they cannot.
The good news is that, in some cases, the IRS will be willing to use an offer in compromise to resolve back tax debt. What is this and how can it help you in this situation?
Agreeing to pay less
Generally speaking, if you’re filed an offer in compromise, it means that you are asking the IRS to allow you to pay less than the full total. If you qualify, then they will forgive a portion of your debt and the matter is settled. For instance, you may have $100,000 in back taxes and if you prove you can only pay $10,000 the IRS can accept an offer in comprise allowing you to pay only the $10,000 to settle the entire $100,000.
To determine if you are eligible or not, the IRS is going to look at a lot of different factors, such as asset equity, monthly expenses, general income trends and your overall ability to pay. When they determine that you’re not ever going to be able to pay the full amount, then they may be willing to wipe out the debt if you are willing to pay as much as possible now. The offer in compromise is sometimes a very useful tool in resolving back taxes with the IRS.
It can be a long and complicated process and experience matters when preparing and filing an offer in compromise. Be sure you have a sound understand of the entire process and know exactly what steps to take before trying to file.