Individual taxpayers and business owners can use the IRS’s recently updated Offer in Compromise Booklet to learn how an offer in compromise works and decide if it could help them resolve their tax debt.
An offer in compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. An offer in compromise is an option when a taxpayer can't pay their full tax liability. It is also an option when paying the entire tax bill would cause the taxpayer a financial hardship. The goal is a compromise that suits the best interest of both the taxpayer and the agency.
When reviewing applications, the IRS considers the taxpayer’s unique set of facts and any special circumstances affecting the taxpayer’s ability to pay as well as the taxpayer’s:
- Asset equity
The booklet covers everything a taxpayer needs to know about submitting an offer in compromise, including:
- Who is eligible to submit an offer
- How much it costs to apply
- How the application process works
The booklet also includes the forms that taxpayers must complete as part of the Offer in Compromise process. The current application fee is $205. However, taxpayers who meet the definition of a low-income taxpayer don’t have to pay this fee.