Offer In Compromise - Effective Tax Administration

(Paying The Tax Would Create A Hardship)

In this type Offer in Compromise, the value of the equity in your assets plus your "excess" income over the next 48 or 60 months must exceed the amount of tax owed, however, paying it would create a hardship. A theoretical example would be an elderly couple, retired and living on social security who owe $50,000 in tax. However, they have a home that is paid off and valued at $75,000. On paper, they could pay the tax, but if they did, they would not be able to afford the mortgage payments or the cost of alternative housing. 

An Offer in Compromise is filed on a Form 656. On this form you indicate what years you want to compromise, what tax you are compromising, how much you are offering, how you will fund the Offer and the reason you are making the Offer (Effective Tax Administration).

You will be required to complete Form 433-A (and Form 433-B if you are self-employed). The purpose of Forms 433-A and 433-B is to identify all the assets and income you have available to pay the tax. How these forms are filled out is critical. It is recommended that you do not attempt an Offer in Compromise yourself without some professional guidance. We would be please to assist you. Contact us today to get started or learn more.

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