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Should You Submit an IRS Offer in Compromise? 5 Questions to Ask Yourself Before You File


Posted in on November 16, 2020

Are you behind on your federal taxes? If so, addressing your situation proactively is a much better option than waiting for the Internal Revenue Service (IRS) to come knocking. Depending on your current circumstances, you could potentially have a handful of different options available, one of which is to submit an offer in compromise. Here, Virginia tax defense attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, outlines five important considerations for deciding whether to submit an offer in compromise to the IRS.

Five Questions for Deciding Whether to Submit an Offer in Compromise to the IRS

Question #1: Are You Eligible to Submit an Offer in Compromise?

In order to submit an offer in compromise (and have it accepted by the IRS), you must be able to demonstrate that you meet the eligibility criteria. Most significantly, this includes being able to prove that either (i) you cannot afford to pay the full amount you owe, or (ii) your personal or business circumstances are such that requiring full payment would cause undue economic hardship. If you can reasonably afford to pay what you owe, you are not eligible to submit an offer in compromise, but you may be eligible for another form of federal income tax relief.

Question #2: Are You Prepared to Pay as Much as You Can?

When evaluating an offer in compromise, the IRS considers the taxpayer’s “reasonable collection potential,” or “RCP”. Essentially, this means that the IRS will do its best to make sure that you pay as much as possible. In addition to your income from all sources, your “real property, automobiles, bank accounts, and other property,” are also considered in calculating your RCP.

Question #3: Are You Prepared to Deal with a Rejection or Return?

While it is possible that the IRS will accept your offer in compromise, it is also possible that the IRS will either reject your offer or require you to revise and resubmit your offer with additional documentation. When submitting an offer in compromise, there are no guarantees, so you should be prepared to file an appeal or put additional work into your offer if necessary.

Question #4: Are You Comfortable with the Consequences of Non-Payment?

Ideally, once the IRS accepts your offer, you will be able to timely pay the full reduced amount you owe. But, if you run into additional unexpected financial challenges and are not able to make all of your payments, then you could face collection action and the possibility of a tax fraud or tax evasion investigation.

Question #5: Are You Ready to Put in the Time and Effort to Prepare Your Offer in Compromise?

Finally, while your attorney will be able to handle much of the work that goes into putting together an offer in compromise for you, you will still play an important role in the process. As a result, before you decide to move forward, you should be sure that you are prepared to devote the time and effort required.

Get Help with Your Offer in Compromise from an Experienced Virginia Tax Defense Attorney

If you would like more information about the IRS’ offer in compromise program, we invite you to schedule a confidential consultation. To discuss your options with Virginia tax defense attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752, email ket@thornlawgroup.com or contact us online today.

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