How to Deal With the IRS Compromise Settlement Agreements
If you owe back taxes to the IRS, you may qualify for a compromise agreement to settle your outstanding bill. To reach a settlement agreement you will have to submit an Offer in Compromise. The IRS is not required to accept the offer but might do so if it believes it is the best way to collect at least some of your tax bill.
Other People Are Reading
Things You'll Need
- Application fee Collection of tax bills Collection of past tax returns (last three years) IRS Form 656 Employment (or unemployment) records Other personal financial information
Instructions
-
Submitting an Offer in Compromise
-
1
Compile all of your past tax information, review all tax bills from the IRS and request an up-to-date tax bill from the organization. The IRS is required to provide you with this information.
-
2
Compile all of your financial records for the past few years. You must provide proof that you have filed your last three annual tax returns, and you will also need to show the IRS what your current financial situation is and why.
-
-
3
Fill out Form 656, which is a detailed form provided by the IRS. You can get this form by calling the IRS or visiting irs.gov.
-
4
Pay the application fee and submit Form 656. The IRS will not even look at your Offer in Compromise if you haven't paid the application fee. The IRS will contact you after it receives your application.
-
1
Tips & Warnings
The IRS will only accept your offer if it thinks it will be beneficial for the agency. Typically, you must show that there is doubt as to whether you are actually liable for the entire amount the IRS claims you owe or that you are financially unable to repay the full tax bill.
If the amount you owe the IRS is substantial, it would probably be to your benefit to hire an attorney or other tax professional to help negotiate with the IRS. The amount a professional can save you in taxes may justify their service fee.
