Should I Make My Own Offer In Compromise?

You may have asked yourself the question “should I make my own offer in compromise?” To answer this question, you first need to consult a tax professional who helps you to settle your tax debts. Only after this will you know if you should make your own offer in compromise. Eventually, the decision would depend on your particular financial situation. The tax professional initiates the process of determining your potions by preparing a financial statement that reflects your income and assets.

The length of time it takes to complete an end-to-end offer in compromise depends on the speed with which the IRS processes your offer. In most circumstances, the process takes between 6 months to 2 years.

Many clients who ask themselves the question “should I make my own offer in compromise?” worry about what they would have to pay a tax professional. Tax professionals charge varying rates for the service of an offer in compromise and other IRS representation services. The actual charge depends on the complexity of the case. An offer in compromise can cost about $2,500 in its own right, again depending on the complexity of the case. An additional financial burden arises when a client needs more than just an offer in compromise – which is often the case. In such cases, the client may need to prepare back taxes, which definitely adds to the cost.

In most cases, an offer in compromise program is a viable option for taxpayers who are unable to pay off their tax debts in full. It is necessary to consult a tax professional to determine whether any alternative tax-debt strategy exists. In some cases, an installment agreement or bankruptcy may be far more suitable. The offer in compromise option has certain disadvantages, such as the fact that filing an offer delays the 10-year statute on collecting tax debts. While the IRS has ten years to collect the taxpayer’s tax debts, the ten-year period facility is revoked while the IRS is processing an offer in compromise.

In other words, this gives the IRS even more time to collect on tax debts in case they decide to reject an offer in compromise. If you are willing to risk it, you must fill out Form 656, Offer in Compromise, along with Form 433-A, Collection Information Statement. After this, you use the Form 433-A Worksheet to calculate the amount you offer to the IRS.

Before you opt for an offer in compromise, you should be aware of the applicable terms and conditions. When you opt for this method of settling your IRS debt, you essentially agree to pay the offer amount in the Offer in Compromise, to file your tax returns punctually and to pay your taxes punctually for the ensuing five years. You also agree to allow the IRS to keep any tax refunds, payments, and credits applied to your tax debts prior to submitting your Offer in Compromise. By opting for an offer in compromise, you also agree that the IRS can retain any tax refunds that you would have received during the calendar year during which the approval of your Offer in Compromise comes through.

Noncompliance with these terms entitles the IRS to revoke the Offer in Compromise, and to reinstate the full amount of tax liability. To protect yourself from revoking of your Offer in Compromise, you must ensure filing of your tax returns for the next five years under any circumstances. In case you are unable to file by the due date of April 15th, you need to ask for an automatic extension and file your taxes by the extension deadline without fail. You must also make your tax payments punctually. At all costs, guard yourself against the revoking of the Offer in Compromise. If this does happens, the IRS will undoubtedly reinstate the full amount of your tax liability, along with additional penalties and interest. You will then find yourself on the receiving end of highly aggressive collection efforts.