Tuesday, April 1, 2008

The Offer In Compromise Is Not The Only Option.

Often, the first question asked by people and business owners that have tax problems is “What about an Offer in Compromise?” As I have recently posted on this blog, the percentage of accepted Offers in Compromise is not exactly staggeringly high. In fact, many people and businesses simply will not qualify for an Offer in Compromise.

When facing tax problems, the Offer in Compromise is not the only option. I am not suggesting that the possibility of a compromise should be ignored. Rather, I strongly suggest that a compromise financial analysis be conducted. That said, where a compromise is not an option, other possibilities exist for resolving a tax debt and preventing a tax levy on a bank account and wages.

Principal among these options is the installment arrangement. Where an individual’s tax debt is less than $10,000 the IRS will automatically accept an installment agreement. As the liability climbs above that threshold, the IRS will require a more in depth analysis of a financial statement prepared by the taxpayer. Under the American Jobs Creation Act of 2004, the IRS is even allowed to accept an installment arrangement that would pay less that the full amount of tax, penalties and interest due.

If an installment agreement is not right for you, there may be additional options based on

 the nature of your tax debt (income vs. employment taxes),
 the responsibilities you have concerning the payment of business employment taxes,
 the structure of your business (sole proprietorship, LLC, corporation),
 what you own or how you own it,
 and more.

The point is, you should not limit the resolution of your tax debts to an Offer in Compromise or even an installment arrangement. Your particular circumstances may allow for a much broader range of solutions.

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