An offer in compromise allows qualifying people to resolve their tax debt for less than the full amount. This agreement can be reached based on the person’s ability to pay, their income level, the amount of other expenses they have, and finally their asset equity. [1]
Earlier this year the Internal Revenue Service expanded their offer in compromise initiatives to better suit very financially stressed households. This is excellent for people who owe back taxes. This expansion makes it easier to pay off their tax debt at a quicker rate, and also allows more people to qualify. Forbes summed up the changes as follows:
- Revising the calculation for the taxpayer’s future income
- Allowing taxpayers to repay their student loans.
- Allowing the taxpayers to pay state and local delinquent taxes.
- Expanding the Allowable Living Expense allowance category and amount.
According to the IRS, “We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.”[2]
