You’ve completed your federal tax return, but instead of breathing a sigh of relief, you’re hyperventilating: Yes, you can pay the IRS what you owe, but it would have a devastating impact on your life. There is hope, however—you can submit an IRS Effective Tax Administration (ETA) Offer in Compromise (OIC), and if the IRS accepts it, you can pay less than you owe. When making its determination, the IRS considers factors beyond your ability to pay.

Completing Forms for an Offer In Compromise

To determine if an OIC may work for you, begin by completing the IRS Offer in Compromise Pre-Qualifier tool. Next, complete both Form 656, Offer in Compromise, and Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, available together in the Form 656 Booklet: Offer in Compromise. Your case is stronger if you provide complete, clear, accurate information and demonstrate that you have a limited income and your payment offer is reasonable.

When submitting the forms, you will need to include the $205 application fee and an initial payment towards the total amount you propose to pay. On average, the IRS takes six to 12 months to review an offer and will notify you by letter of their decision.

What the IRS Considers When Reviewing Your OIC

The details of each case are unique, but typical grounds for approval include the following:

• A long-term, severe illness or disability prevents the taxpayer from earning a living.
• The taxpayer is close to retirement or is retired, and borrowing from or withdrawing funds from retirement accounts would cause extreme hardship.
• Liquidating solid assets would not cover the tax amount owed.

Highland Tax Group Can Help

While the IRS will accept Offer in Compromise and Collection Information Statement forms you complete yourself, given the financial stakes, it is prudent to hire a tax expert to do so. The experts at Highland Tax Resolution can advise you on the best options and strategies in your case.