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Winchester, VA: Can I use an Offer in Compromise to Eliminate My Debt with the IRS?



Not likely that you can completely eliminate your debt; however, 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 if doing so creates a financial hardship. To determine your eligibility for an Offer, the IRS will consider your unique set of facts and circumstances:

  • Ability to pay;

  • Income;

  • Expenses; and

  • Asset equity.

The IRS will generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. There are several different types of Offers. The most common is the Doubt As to Collectibility (DATC). You agree that you owe the debt, but you are not able to pay or will incur financial hardship. In this case you file DATC.

Another type of Offer is the Doubt As to Liability (DATL). You file this kind of offer when you argue that you do not owe the tax at all. There are two other types of Offers in Compromise, but they are rarely used: Doubt as to Collectibility with Special Circumstances and Effective Tax Administration.

When you submit your offer, you will be required to pay the application fee (currently $205) and select a payment option. There are 2 payment options:

  1. Lump Sum: Pay 20% of your total offer amount and submit with your application. If the offer is approved, pay the remaining balance in 5 or fewer payments.

  2. Periodic Payments: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

Depending on your situation, one option may be better than the other. You will have your best results if you consult a tax representation expert that is trained and experienced in submitting Offers in Compromise.

If you hire a tax professional to help you file an offer, be sure to check his or her qualifications. I suggest finding an Enrolled Agent. You can find an Enrolled Agent in your area by going to taxexperts.naea.org

We help our clients in Winchester VA, Strasburg VA, Martinsburg WV and Charles Town WV to resolve their tax debts!. If you need assistance please feel free to contact me at 540-300-1988 or brianbarto@libertytax.com.


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