What is the process for seeking the offer in compromise with the IRS?

An offer in compromise is when you request that your tax liability to the IRS be reduced in order to settle the liability. You will need to demonstrate to the IRS one of three grounds to convince them why they should agree to your offer. The grounds include the following: 

• Doubt  that you could pay the liability within the statutory time allowed to collect the debt.
• Doubt that you owe the liability based upon a mistake, misinterpretation or additional evidence.
• The payment would cause you a financial hardship or it is unjust.

In order to request an offer in compromise, you should submit a $150.00 filing fee, Form 656, Offer in Compromise and a separate check or money order for the amount of the offer you are proposing to settle your debt to the IRS by mail. All checks or money orders should be made payable to the United States Treasury. You can access the Form 656 online at the IRS website and obtain the proper mailing address as well. The IRS is not required to accept your offer. They will respond in writing whether or not they have accepted it. You have the choice of three different payment options if they accept your offer, including a lump sum cash payment, a short term period payment plan and a deferred period payment plan. If they do not accept your offer, they must return your $150.00 filing fee and your proposed payment. 

It is recommended that you seek the advice of a tax attorney to assist you with negotiating an offer in compromise with the IRS. Tax matters are complicated, and the IRS can be difficult to deal with. The IRS will take your offer more seriously if they know you have legal representation.