Nina Olson, the National Taxpayer Advocate discusses the Offer In Compromise – a tax relief program to settle your tax debt for less than you owe. There are basically three (3) different classifications by which taxpayers may be able to settle their tax debt for less:

  1. Doubt of Collectibility – Taxpayers who owe taxes but don’t believe they can ever pay the amount of taxes owed may be able to settle their tax debt for a lesser amount.
  2. Doubt of Liability – Taxpayers who don’t believe they owe the full amount of taxes owed as computed by the IRS.
  3. Effective Tax Administration – Taxpayers who agree with the tax debt owed and may have available the amounts needed to settle their taxes but due to certain special circumstances believe that it would be unfair to pay the entire tax liability.

The offer in compromise gives taxpayers a “fresh start” in settling their tax debt. Such an agreement requires taxpayers to remit an acceptable offer amount. Once approved, taxpayers must agree to file future tax returns timely and remain current with all tax payments for the following five (5) years or may be subject to collection activities as reactivated by the IRS including the original amounts owed.

Structuring a successful offer-in-compromise will generally require professional intervention from a paid tax representative. Taxpayers can obtain professional help through the services of a tax attorney, certified public accountant or enrolled agent. Taxpayers who cannot afford professional representation can also obtain free help through contacting the IRS directly or through a low income tax clinic.