Taxes are a necessary part of life but something many Michigan residents are unprepared for. As you part with some of your income every paycheck to pay for your taxes, it is often difficult to find that you have a tax bill the next April when the filing due date comes up. Fortunately, the Internal Revenue Service offers a few options to help you get caught up on your tax bill. One of those options is an offer in compromise.
An offer in compromise allows for someone to settle a tax debt for less than the amount that is owed. This is ideal for those who find their tax bill creates a financial hardship or you have no way to pay your tax bill. The IRS considers several factors when determining if someone is eligible such as asset equity, expenses, income and ability to pay. Typically, an offer in compromise is accepted when the offered amount is what the IRS can expect to get during a certain period from an individual.
When it comes to an offer in compromise, there are two payment options. You can set up periodic payments. This allows you to submit your first payment with your application and you can continue with monthly installment payments while your application is being considered. The other option is to pay in a lump sum of cash. In this case, you will send 20% of your offer with the application. Once the application is approved, you have five more payments to pay off the rest.
You do not need to send an initial payment or an application fee if you meet the low-income certification guidelines. While your offer is evaluated, you do not need to make monthly payments on the total bill. An offer in compromise can provide relief to those who struggle to pay their tax bill each year.
This is intended for educational purposes and should not be interpreted as legal advice.