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 Presented by Alvin S. Brown, Esq., tax attorney, formerly with the
Office of the Chief Counsel of the Internal Revenue Service.
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10 Ways To Reduce Your Tax Liability To The IRS
Through An Offer In Compromise

1.
The IRS may legally compromise a tax liability owed based on "collectibility" and/or "liability." Generally, the IRS will not accept an offer unless all of your tax returns have been filed.

2.
 "Collectibility" is doubt that the IRS can collect the full amount owed. You must include a statement that describes in detail why the Service cannot collect more than offered from your assets and present and future income, taking into consideration that the Service generally has 10 years to collect the liability.

3.
 "Liability" deals with doubt as to whether you owe the amount of tax. If there is doubt as to liability, you must submit a written statement describing in detail why you do not believe you owe the liability. The Service cannot accept a compromise where the liability has already been decided by a court.

4.
 Submitting an offer does not automatically suspend collection activity. However, there are actions that can be taken to suspend collection if collection would result in a financial hardship.

5.
 The ultimate goal of an offer-in-compromise is a settlement that is in the Government's and taxpayer's best interest.

6.
 An offer requires you to submit information on your assets and liabilities and information regarding your monthly income and expenses.

7.
 The amount of the offer should at least equal or exceed your equity in all assets. When reviewing an offer, the IRS considers four factors:
  • The amount collectible from your assets.
  • The amount collectible from present and future income. The IRS will consider the present value of money in relation to future collection potential. In other words, by accepting the offer, the IRS will get money that is worth more today than in the future.
  • The amount collectible from 3rd parties.
  • Sources of funds that are available to you but not subject to the IRS's collection action.

8.
 A deposit is not required to be paid to the IRS, although the IRS encourages deposits.

9.
 If the IRS accepts your offer, you must indicate the time period for paying the offered amount.

10.
 A rejected offer can be appealed. There is no limit on making a new offer at another time.