The IRS only needs you to pay, no matter how much you owe. As a rule, you must determine if the IRS is open to negotiation to settle on a compromise. The Offer in Compromise enters in this situation. It is not that easy to solve your IRS issues, though.
You should not have any investments, not earn sufficient money to settle your debt, and not own properties in order to take advantage of an Offer in Compromise. You should be poor for the IRS to realize that accepting the small amount of money you can give is more cost effective than going after what little you have.
Indeed, you cannot just select any figure that you wish to pay the IRS on back taxes when negotiating an Offer in Compromise. The IRS will have you determine what you can likely pay. To let you determine this figure, you can utilize Forms 656 and 433-A.
The process of negotiation can truly begin as soon as you have submitted your offer and the supporting documentation. The IRS will send back a slightly higher counter offer, or even the whole amount, if they don't like your offer. However, even if they come back with the full amount, you are not at square one. This is a negotiation, and there are various aspects to every meeting that may help or hurt you when trying to fix your IRS issue.
As a benefit in numerous cases, the IRS will cease their current actions against you when you file an Offer in Compromise. If they were about to move to garnish your wages, those efforts are typically put on hold until your Offer in Compromise has either been accepted or dismissed.
Even if the Offer in Compromise is dismissed, you still have other payment options to consider. You can negotiate an installment plan instead of having to settle your total tax debt in full at one time. However, to stop the interest from accruing on your back taxes, it's still best to settle the entire figure as soon as possible.
Keep in mind that the statute of limitations on your tax debt extends by the amount of time it takes to come to a decision from the moment you begin the negotiating process by filing an Offer in Compromise. So if the process requires a year for your case to be dismissed, the statute of limitations will be extended by a year.
