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Based on the current economic downturn, many taxpayers find themselves unable to pay their tax bill. That’s why many request an offer in compromise from the IRS. But an offer in compromise is not for everybody. Many people believe that if they currently do not have the funds on hand then the IRS will automatically settle on the tax debt. This is simply not the case.

Prior to submitting your request for an offer in compromise, make sure that you explore all other options first. You may be able to borrow funds from family or friends and or even be able to take out a personal loan.

Taxpayers are required to file Form 656 or Form 656-L when they feel that the tax liability is inaccurate. In most instances, taxpayers must submit Form 433-A or Form 433-B to provide collection Information. Neither of these forms are required when a taxpayer submits an offer solely based on doubt as to the existence of the tax liability.

Not only is it critical to file your forms timely, you must make sure that you carefully reply to any IRS correspondence. The IRS may request additional information in order to process your offer.

Taxpayers must submit $150 with the offer in compromise forms. Some taxpayers may be exempt from the fee depending on their income or whether or not the offer is based strictly on doubt as to tax liability. Taxpayers who claim the poverty guideline exception are required to certify that they are eligible by filing Form 656-A, Income Certification for Offer in Compromise Application Fee.

An important step in the process is making sure that you are current on all your tax filings. It will not look good to the IRS if you are not filing tax returns or making timely tax payments.

An offer in compromise is not for all taxpayers. Most will not qualify because they have financial resources or the ability to make installment payments. If you believe that you qualify make sure you are diligent in your efforts and provide the necessary paperwork. Then be prepared to wait.

Often there are circumstances that arise when a taxpayer has accumulated a substantial tax liability that clearly exceeds any ability to pay in a lump sum. In this situation, the taxpayer should consider hiring an Offer in Compromise attorney to handle the negotiations with the IRS.

The IRS has made great strides in improving the processing of OICs. These efficiencies are making it easier for taxpayers to navigate the OIC process and enable them to receive responses in a timely manner.

Most offers in compromise are denied as the IRS recently stated that over 83% of the offers are rejected. The two main reasons that rejection occurs is because the documentation is inaccurate or incomplete or the taxpayer earns in excess of the required allowance. Your offer in compromise attorney will make sure that your filing is accurate and complete.

If the IRS sends you a response, make sure that you respond promptly. You may only have a few weeks to get the final information prepared and submitted back to the IRS. Failing to timely respond is often a reason for rejection.

The taxpayer has a few weeks to respond with the requested items. If the response is not timely, the IRS can return the offer and dismiss the offer if need be. If the offer is returned, the IRS will not refund the processing fee.

But hope is not lost if you are rejected. Just make that when you solicit offer in compromise help that you get what you are paying for.

Hiring an offer in compromise attorney can help you improve the chance that your offer will get accepted. At a minimum they can review your situation and provide you valuable information that will allow you to make an informed decision.

In uncertain financial times, many people struggle to pay for food, housing and other essentials. As people struggle to pay for essentials, they tend to not pay back taxes. But the IRS will not go away. Many people consider an offer in compromise to try to reduce any balance they owe to the IRS. The reality is that it may be difficult for the average person to complete an offer in compromise settlement.

Always make sure that a tax offer in compromise is submitted as a last resort. You must review other payment options to determine if there is a chance that you may be able to pay off the debt either by taking out a loan or from other resources you may have.

Taxpayers are required to file Form 656 or Form 656-L when they feel that the tax liability is inaccurate. In most instances, taxpayers must submit Form 433-A or Form 433-B to provide collection Information. Neither of these forms are required when a taxpayer submits an offer solely based on doubt as to the existence of the tax liability.

Once the applicable forms are filed, make sure to respond promptly to any additional requests the IRS may have. Often the IRS will just need clarification on your personal information or financial situation. A timely response will make it easier to get a tax offer in compromise accepted.

Along with your completed forms you must make sure that you make the required payments. The general rule that you must follow when determining how many offers and the related application fees due is that there is one payment fee and form per entity. Form 656-B contains an application fee and a payment matrix that will help you determine the number of forms that must be filed and how many application fees are required.

An important step in the process is making sure that you are current on all your tax filings. It will not look good to the IRS if you are not filing tax returns or making timely tax payments.

A tax offer in compromise is available to all taxpayers, although it may be difficult to qualify. The goal of the IRS is to accept the offer when it is in the best interest of both the taxpayer and the government. In addition, the IRS wants to promote voluntary compliance with all future filings and payment obligations.