Owing the IRS is scary. The debt coupled with hearing what could possibly happen if the debt is not paid is downright terrifying. Then a commercial appears that offers a glimpse of hope; “settle your IRS debt for pennies on the dollar.” You let out a sigh of relief as you pick up the phone to call. According to the commercial, you will save a significant amount of money. You called without hesitation, but, is this true? Is it really that easy to settle a tax debt with the IRS for less than what you owe?
The truth is that most of the commercials are referring to a process called Offer in Compromise. Offer in Compromise is the process by which the IRS agrees to settle a tax debt for less than what is owed. However, it is not as easy as the commercials make it seem. There are a lot of misconceptions about the Offer in Compromise process.
First, this is not a situation where a tax professional sits across the table from an IRS agent and negotiate a settlement. An Offer in Compromise is actually submitted using an IRS form (form 656). Secondly, an offer is not just made out of the blue. A viable offer must be supported by financial documents showing your ability or inability to pay the IRS in full. And lastly, not all offers are accepted. In 2017, the IRS only accepted about 40% of the Offers in Compromise that were submitted.
Remember; do not fall for the hype. If a company is offering settlement for “pennies on the dollar” without even reviewing your financial information, then that company has not performed an accurate due diligence assessment. If you feel that you need representation, make sure you do your research and seek out an experienced tax attorney. For more information, please give us a call.