An Offer in Compromise is a program offered by that the IRS that allows you to settle your tax bill for less than the full tax amount you owe.

The IRS is essentially confirming that you really do not have the ability to pay.

The burden of proof to show inability to pay will depend on certain factors:

• Taxpayer's Ability to pay
• Income Earned Per Month
• Cost of Living Expenditures
• Assets of Taxpayer

First things first, in order to qualify you need to be in "compliance" with the IRS meaning you must be current with your tax returns, and all tax returns should be filed before applying.

Next the IRS will require you:

• Gather the specific documents requested such as paycheck stubs, bank statements, credit card statements, utility bills, etc.
• Complete Form 433-A (Individuals) or 433-B (Businesses). This requires specific details about your financial status.
• Complete Form 656, the general application for compromise and calculation of payment terms.
• Application fee of $205
• Initial non-refundable payment

Be Prepared to Select a Payment Option When Submitting the Application.

Your initial payment varies based on your offer and the payment option you choose:

• Lump Sum Cash: Submit the initial payment of 20% of your offer amount with your completed application. If the IRS accepts your offer, you'll receive written confirmation. Then you must pay the remaining balance due on the offer in five or fewer payments.
• Periodic Payment: Submit your initial payment of your offer application. Then continue to pay the outstanding balance in monthly installments as you reported in the application while the IRS considers your offer. If the IRS accepts your offer, continue to pay monthly until paid in full.

*The package must be completed correctly or the IRS will delay the process even longer.