Tax debt can accumulate rapidly, especially when people lose their jobs or make the same mistake year after year when filing their income tax returns. In addition to the base amount of unpaid taxes that they owe, they also have to cover any penalties assessed by the Internal Revenue Service (IRS) and interest.
Many people are not in a position to pay the full amount of taxes that they owe at once when they receive notice of a past-due balance from the IRS. They may need to negotiate an offer in compromise to make their tax debt manageable.
Who actually sets the terms for a payment plan or a lump-sum tax settlement agreed upon as an offer in compromise?
The taxpayer makes the initial proposal
The taxpayer in arrears understands their own finances better than outside parties ever could. They can propose specific terms that work for them based on their income and other financial obligations. The IRS then responds to the proposed terms.
In some cases, the IRS may immediately approve an offer in compromise. Other times, it may be necessary to negotiate. Especially when negotiations are necessary, taxpayers typically benefit from having legal representation. The bigger the tax debt is, the more complex the negotiation process may become. The good news is that the IRS is often flexible with people who make offers in good faith based on their resources and current income.
An offer in compromise is a viable solution for many people with large income tax debts. Having help while addressing an income tax controversy can make it easier for taxpayers to take control of the situation.