How to Settle Your IRS Debt

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By AllFYB
eHow Community Member

Article Rating:

(22 Ratings)

We have all heard the commercials "Settle your IRS debt for Pennies on the Dollar" and wondered, "Is that true could I really stop the Interest and Penalties and Payoff the IRS". It is true, you can make a Deal with the IRS and here's some help to understanding it.

Difficulty: Moderate

Instructions

Things You'll Need:

Access to the Internet
Paper, Paper and Copies
Time and Patience

Step 1

UNDERSTAND OIC ( Offer in Compromise): An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer's debt to the IRS for less than the amount owed by the taxpayer.
Step 2

KNOW IF YOU QUALIFY, to submit an Offer in Compromise: 1) If you can pay the debt in full, you do not qualify 2) If you have an open bankruptcy proceeding, you do not qualify 3) If you are not able to pay the application fee ($150.00 currently) and 20% of the debt with your application or submit a payment offer and a form 656A (Income Certification), you do not qualify
Step 3

ADDITIONAL THINGS YOU NEED TO KNOW before submitting an Offer in Compromise: 1) You may not qualify 2) Any payments made with or prior to submitting an offer in compromise are non-refundable 3) Tax Liens are not released until all agreements and payments with the IRS are met (meaning you will not be able to sell anything with a lien on it to make the agreed payments) 4) You can tell the IRS how to apply your payments made with the offer to minimize your debt 5) The IRS will keep any refund due you or any levies made against you during the process 6) You will be on a Five Year Tax Compliance program after the Offer is accepted and it can be reversed if you do not file and pay your returns during that period 7) You must answer all correspondence from the IRS during the review/acceptance/rejection process.
Step 4

IRS FORM 656 Offer in Compromise, Where to get it: www.irs.gov has the full definition of offer in compromise and step by step instructions for completing the application.
Step 5

HINT: Remember to mark and include all requested proof, the IRS will review the application until it reaches an exception and reject it without reviewing the remaining documents.

Comments

melly1143 said

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on 6/15/2009 Great info - I give this advice a lot! 5* plus a rec

lucindaroth said

on 4/29/2009 Very good information on debt settlement thank you

taxattorney said

on 3/26/2009 I do offers in compromise for a living. IRS has its method of calculating what minimum offer it will accept. If your debt is $100 over the minimum required offer or $250,000 over the minimum required offer, IRS will accept it. Settling for "pennies on the dollar" is only real, if you owe IRS a bundle and have little by way of assets, i.e., little equity in real estate, no retirement funds, low or no wages, no investments, etc., to pay. Usually, "pennies on the dollar are just a get rich quick scheme for the "expert."