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IRS Encourages Delinquent Taxpayers to Consider an Offer In Compromise

Posted in Offshore Account Update on October 31, 2022 | Share

In a recent Tax Tip, the Internal Revenue Service (IRS) advised individuals and businesses that are behind on their federal tax obligations to consider submitting an offer in compromise. As the IRS explains, the offer in compromise program, “allows taxpayers to enter into an agreement . . . that settles a tax debt for less than the full amount owed[, and s]ometimes . . . significantly less, especially if they have low income and few assets.”

5 Important Considerations for Submitting an Offer in Compromise to the IRS

But, while submitting an offer in compromise can be a good option for some taxpayers, it is not the best option in all circumstances. If you or your business is behind, should you try to settle with the IRS? Here are some important considerations:

1. Do You (or Does Your Business) Qualify?

The first consideration to address is whether you qualify to submit an offer in compromise. The IRS' offer in compromise program is not open to all taxpayers. To qualify, you (or your business) must:

  • Have filed all required tax returns;
  • Have made all required estimated tax payments (employers must also have made their three most-recent quarterly deposits);
  • Not currently be going through bankruptcy; and,
  • Have a valid extension for the current tax year (if applying for the current tax year).

2. Will Settling Your Tax Debt Help You Move Forward?

Another important consideration is whether settling your tax debt will help you move forward. Can you submit a reasonable offer that the IRS is likely to accept? If you settle your (or your business’s) federal tax debt, will you still have other unmanageable debts to contend with? If your (or your business’s) financial issues extend beyond paying the IRS, then it may be better to consider a more comprehensive solution.

3. Do You Actually Owe What the IRS Claims?

Before submitting an offer in compromise, it is important to make sure you actually owe what the IRS claims. If the IRS has calculated your tax debt incorrectly, then you may need to consider a tax appeal instead.

4. Do You Have Better Alternatives Available?

Along with filing a tax appeal, you could have other better alternatives available as well. There are a variety of ways to resolve issues with the IRS—of which submitting an offer in compromise is only one.

5. Could Submitting an Offer Lead to an Audit or Investigation?

Finally, it is also important to assess the risk of your offer in compromise leading to a tax audit or criminal tax fraud investigation. Any time you voluntarily submit information to the IRS, you need to be very careful to ensure that you are not inadvertently exposing yourself to scrutiny.

Discuss Your Options with Tax Attorney Kevin E. Thorn in Washington D.C.

If you have questions about submitting an offer in compromise to the IRS, we can help you make an informed decision. To request a confidential consultation with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call our Washington D.C. law offices at 202-349-4033, email ket@thornlawgroup.com or contact us online today.


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