An IRS Offer of compromise is available to all taxpayers, although it may be difficult to qualify. The goal of the IRS is to accept the offer of compromise 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. Taxpayers should be advised that the IRS has a right to any tax refund still due to the individual for any years up to and including the year in which the Offer is accepted. After that year, the taxpayer regains his/her right to receive tax refunds.

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.

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. It is also important to remember that an individual whose offer of compromise was accepted by the IRS must continue to make all payments on time, no matter the type of installment plan. If he/she does not, the IRS may change the offer of compromise to default status.

Individuals considering the Deferred Periodic Payment option would be advised to also consider an installation agreement. That said, all financial situations are different, and the taxpayer is advised to either research his/her options thoroughly before deciding on a course of action. For example, if tax debt were accrued years previous to the Offer, and the Statute of Limitations had not been extended, it could conceivably benefit the taxpayer to opt for this payment method.

Always make sure that a tax offer of 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.