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How taxpayers can find much-needed relief via an offer in compromise

When a person is experiencing serious and sustained financial difficulties, chances are good that they will eventually start to see the pile of unpaid bills grow and the correspondence from creditors begin in earnest.

As distressing as this reality is, consider how much more distressing it can be when one of these letters is from the Internal Revenue Service, requesting payment for a past-due tax debt. Indeed, you are now seemingly at the mercy of a powerful federal agency with vast resources and significant enforcement options at its disposal.

While trepidation on the part of taxpayers is understandable, it's important for them to understand that they are not with options for relief.

If this seems hard to believe, consider what is known as the offer in compromise, which, according to the IRS, provides taxpayers with "a path toward paying off their tax debt and getting a 'fresh start.'"

In general, an offer in compromise is an arrangement between the IRS and a taxpayer to settle an outstanding tax debt for less than the amount owed. This involves the taxpayer submitting an offer that the agency believes is reflective of their true ability to pay.

While this may seem simple enough, it's an incredibly complex undertaking. Indeed, not only is the mere submission of an offer in compromise no guarantee of IRS acceptance, but anyone looking to take this step must first satisfy certain criteria in order to even be considered.

Specifically, a taxpayer must have completed the following steps in order to have their offer in compromise considered:

  • They must have submitted any and all tax returns they are otherwise legally obligated to file.
  • They must have received a minimum of one tax bill that is included in the offer submitted.
  • They must have made all "required estimated tax payments" for the current filing year.
  • They must have made all of the necessary federal tax deposits for the current quarter if they are business owners with workers.

We'll continue examining this topic in future posts …

In the meantime, if you have questions or concerns relating to tax debt or other tax-related matters, consider speaking with an experienced legal professional who can provide answers and pursue solutions as soon as possible.

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Mr. McKellar was voted by his peers as a “Top Attorney” by Knoxville’s CityView magazine in its 2010, 2011, 2012, 2013, 2014, and 2015 editions. In 2014, 2015, and 2016, Mr. McKellar was selected as a member of the “Top 100 Trial Lawyers” by the National Trial Lawyers.

Ms. Easter was voted by her peers as a “Top Attorney” in Cityview Magazine for Family Law / Divorce / Child Support in 2012, 2013, 2014, 2015 and 2016.

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