If you are struggling to pay your debt to the Internal Revenue Service (IRS), you may decide to write an offer in compromise. This allows you to pay your debt off, without paying the whole amount. However, you have to prove that you can’t pay off the full amount that you owe.
When you are writing your offer in compromise, you need to know how you are going to pay off your debt. Here are some of your options.
Lump Sum. If you are able to pay your debt off in one lump sum, you should do so. When you are submitting your offer in compromise, it is important that you pay at least 20 percent of it, along with the application and application fee. Once it is accepted, you can pay the rest off in up to five payments.
Payment Plan. If you want to pay it off using a payment plan, you need to send in the first month’s payment with the application and application fee. Once the offer is accepted, you will pay monthly until your balance is paid off. You have 24 months to pay your debt in full.
Low-Income Certification. If you meet the guidelines for the low-income certification, you won’t have to pay any money up front (except for the application fee). This is determined by the number of people in your family and your monthly income. It also takes into consideration where you live.
It is important that you read up on whether or not you qualify. The IRS has a booklet filled with the information that you need to know before you send in your offer in compromise.
It is important for you to realize that the IRS doesn’t accept many offers in compromise. There is a good chance that yours will be rejected. If that happens, you have 30 days to appeal.
If you have questions or would like a consultation about your specific tax situation, contact us online or give us a call at (800) 790-1507.