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Joe Warkentin

Irs Compromise Agreement

As a business, it`s important to stay on top of your taxes and ensure that you`re paying what you owe each year. But what happens when you`re unable to pay your tax debt in full to the Internal Revenue Service (IRS)? Fortunately, there is an option available called an IRS compromise agreement.

What is an IRS compromise agreement?

An IRS compromise agreement, also known as an offer in compromise, is a legal agreement between a taxpayer and the IRS. This agreement allows the taxpayer to settle their tax debt for less than the full amount owed. The IRS is willing to negotiate this agreement if the taxpayer is unable to pay their tax debt in full or if doing so would cause financial hardship.

The IRS will consider several factors when determining if a taxpayer is eligible for an offer in compromise. These factors include the taxpayer`s current financial situation, income, assets, and expenses. The IRS will also consider whether the taxpayer has made a good faith effort to pay their tax debt.

Benefits of an IRS compromise agreement

The primary benefit of an Offer in Compromise is that it allows a taxpayer to settle their tax debt for less than the full amount owed. This can be an attractive option for those facing financial hardship or struggling to pay their debts. In addition, an IRS compromise agreement can help prevent further collection actions by the IRS, such as wage garnishment or liens.

How to apply for an IRS compromise agreement

If you`re considering applying for an IRS compromise agreement, you should first consult with a tax professional or attorney who has experience in this area. They can help you determine whether you`re eligible for an offer in compromise and guide you through the application process.

To apply for an IRS compromise agreement, you`ll need to complete Form 656, Offer in Compromise. This form requires detailed financial information about your income, assets, and expenses. You`ll also need to provide supporting documentation to the IRS, such as bank statements, tax returns, and pay stubs.

Once you`ve submitted your application, the IRS will review your financial information and determine whether you`re eligible for an offer in compromise. If your application is approved, you`ll need to submit an initial payment and then make additional payments over a period of time to satisfy the terms of the agreement.

Conclusion

An IRS compromise agreement can be a valuable tool for taxpayers who are struggling to pay their tax debt. It allows them to settle their debts for less than the full amount owed and can help prevent further collection actions by the IRS. If you`re considering applying for an offer in compromise, be sure to consult with a tax professional who has experience in this area to ensure that you`re taking the right steps to settle your tax debt.

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