We have all seen the commercials that flood our television at times and promise to reduce our tax debt to pennies on the dollar. They claim they can use the Offer In Compromise program to reduce or eliminate tax debt. This is simply not true, and you will end up feeling like you have been scammed rather than saved. Yes, in extreme circumstances, the IRS will settle old debts for a tiny percentage of the outstanding amount owed, however, these are cases where the client is either near death, completely unemployable or without any valuable assets. Most likely, you will be charged a large upfront fee, but little to nothing will be accomplished regarding your tax problems. Offers In Compromise can be a confusing topic. Below are some common and simple answers to the Offer In Compromise IRS program.

What is an Offer In Compromise?

In certain circumstances, the IRS will accept less than the full amount due to satisfy your tax liability. Usually it is based on your inability to pay the full amount that you owe the IRS. However, an Offer In Compromise can also be based on your belief you do not owe what the IRS says you owe, or your payment will lead you to experience significant hardship. In order for the IRS to determine whether it will accept such an offer, it is necessary to submit complete and exhaustive financial documentation - including assets, liabilities, and current average monthly income and expenses. If the offer is accepted, any tax liens filed regarding those taxes will be released. The IRS is prohibited from levying on assets while an Offer In Compromise is pending.

What is the process of submitting an Offer in Compromise?

For each offer you make, you must pay the IRS a $150 application fee and submit a deposit of funds equal to 20% of the total amount in your Offer In Compromise (as of July, 2006), which is non refundable. This fee, and the deposit submitted with an Offer In Compromise is designed to eliminate frivolous offers. However, it is a small price to pay for the ability to settle your tax debt for less than the total amount owed.

How long does it take for an Offer in Compromise to be approved by the IRS?

Depending on the caseload in your district, it generally takes six to twelve months. No matter how long it takes to review the Offer In Compromise, all further collection activities are suspended during that period.

What happens if the IRS accepts my Offer In Compromise?

Pay the agreed upon amount due as soon as possible. Your tax attorney will explain the options, including a possible extended time to pay. You must also comply with all filing and payment deadlines for the next five years.

Remember, a thorough financial analysis is needed to determine if you are eligible for an Offer In Compromise. No one can promise you that they can reduce your tax debt to pennies on the dollar without talking to you first. Many lawyers including Jones & Ryan Attorneys at Law, offer a free initial consultation to begin the process of tax problem resolution.

The Jones & Ryan website also offers an extensive tax frequently asked questions section for more answers to your common tax questions as well as a simple tax help questionnaire to start the free initial consultation with our experienced lawyers.

Grey W. Jones, Esq.

Grey W. Jones, Attorney at Law, was born into a family of trial lawyers. His dad, Wilbur Jones, defended cases for over 50 years. His brother and brother in law were also trial lawyers their entire career. As a result, he maintains a trial lawyer's approach to tax problems. Currently, Grey still defends large companies such as the Nationwide Insurance Company. His relationship with Nationwide goes back to 1981 and he has defended them continuously all of these years with over 150 total jury verdicts to date.

Tax cases have been a part of Grey's practice since 1985. Currently, he has over 220 active tax files focused almost exclusively on "problem tax cases" such as liens, levies, audits, or enforcement action by the government. Grey is admitted to the Ohio and Minnesota Bar, State and US District Court of Ohio, Supreme Court of Ohio, Federal Appeals District, and the US Tax Court.