The Internal Revenue Service (IRS) describes an Offer in Compromise as “an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer’s tax liabilities for less than the full amount owed.” This agreement described by the IRS is also available with the California Franchise Tax Board (FTB).
What does this agreement do? It allows you to settle out your tax liabilities for typically less than your original tax liability.
Who qualifies? Typically, individuals who have little in the way of net monthly income are those who qualify for an offer in compromise. A person’s net monthly income is determined through the utilization of a form provided by the tax agency you are seeking an Offer in Compromise from. For the IRS it is a Form 433A-OIC. For the FTB it is a 4905PIT.
What’s the catch? One item to be aware of for the IRS is if your Offer in Compromise is accepted, part of the agreement between you and the IRS is that you will remain compliant with tax laws in the future or else the agreement will be terminated and the tax liability will be reinstated.
It is highly recommended that you seek the help of an attorney to file an Offer in Compromise as there are many details which need to be attended to. Thomas Pedersen Attorney at Law is offering free initial consultations and competitive rates.