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What Is an Offer in Compromise?

If you owe a tax debt to the Internal Revenue Service or your state's tax authority and are suffering from a legitimate financial hardship, you may qualify for an offer in compromise.

According to the Internal Revenue Service:

"An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. We consider your unique set of facts and circumstances, [including]: Ability to pay; [i]ncome; [e]xpenses; and [a]sset equity."

Qualifying for an Offer in Compromise

To be eligible for an offer in compromise, you must have filed all necessary tax returns and have made your estimated tax payments for the current calendar year. You cannot apply for an offer in compromise if you're currently in the midst of bankruptcy proceedings.

When you apply for an offer in compromise, you'll also have to submit IRS Form 433-A and Form 656, pay a non-refundable application fee and make an initial payment. The application fee and initial payment are non-refundable.

A tax lawyer can help you apply for an offer in compromise.

Visit LawyerLocator to learn more about tax law or to locate a tax lawyer in your area.