There are few things as stressful as having large amounts of tax debt. It can often be the case that the IRS is seeking more money than a taxpayer made to begin with. When businesses and individual taxpayers keep poor records of their financial information it can be difficult to refute the amounts IRS claim you owe. The stress is often made worse because the IRS, being a federal agency, has the ability to follow you and collect unlike other creditors.
When you are faced with, what appears to be, an insurmountable tax bill from the IRS you still have options. One of those options is submitting an Offer in Compromise (OIC). An OIC allows certain taxpayers to settle their tax debt for less than the full amount the IRS is asking for.
Initially, for you to be eligible for an OIC you will need to make sure you have filed all of your tax returns. If you have failed to file a required tax return, your offer will be returned. Additionally, if you are in the middle of filing for bankruptcy, you are not eligible for an OIC.
The IRS will approve an OIC when it is for an amount that is the most the IRS "can expect to collect within a reasonable period of time." Whether the offer meets this threshold will depend on things such as your income, living expenses and the value of your assets. The IRS generally will not accept your offer it appears as though you have the ability to pay your tax debt in full.
While receiving a large tax bill from the IRS is extremely stressful, it is important to be proactive and work towards a solution. Be sure to contact a qualified tax professional to help you determine what is the best option for you.