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What should you know about an offer in compromise?

On Behalf of | Apr 22, 2024 | Tax |

With the so-called tax season coming to an end in April, most Texas residents have likely already gone through the process of doing their taxes and determining what they owe the state and federal governments.

It can be a tedious and meticulous process, but one fraught with concern for some people as they wonder if they have made their calculations correctly. After all, almost nothing can be as dread-inducing as receiving a letter from the Internal Revenue Service stating that you owe unpaid taxes.

Tax liability options

However, if you do have federal tax liability, you may have options that could help you to potentially avoid having to pay the full amount owed. Ultimately, you may be able to work toward what is known as an offer in compromise with the IRS.

An offer in compromise is an offer to pay the IRS an amount that is less than the full amount of federal tax liability that you owe. Under the right set of circumstances, the IRS might actually accept the lesser amount that you offer. Most people who have filed tax returns properly each year are eligible to submit an offer in compromise, although there are some exceptions.

When the IRS is determining whether or not to accept your offer in compromise, that agency will look at a couple of factors, such as: the taxpayer’s actual ability to pay the full amount due; the taxpayer’s income and expenses; and the taxpayer’s total assets. If you are facing the nerve-racking experience of owing unpaid taxes, an offer of compromise could be a legitimate option to address that debt and move forward.