What is an offer in compromise? Can it help with my tax bill?

An offer in compromise is, essentially, an offer to pay off a tax bill for a lower amount than is due. In exchange for receiving some payment, the Internal Revenue Service (IRS) forgives the remaining debt.

Why would the IRS accept an offer in compromise? Before accepting an offer, the agency would conduct an investigation. This investigation looks into whether or not the taxpayer could potentially pay more than he or she has offered, known as the taxpayer’s “reasonable collection potential.”

If the IRS determines the taxpayer has offered the maximum amount he or she could realistically pay, the agency will generally accept the offer. This way, the IRS will receive at least some portion of payment.

How do you put together an offer in compromise? Those who are considering an offer in compromise are wise to seek legal counsel. The process requires more than a simple offer. The taxpayer must first review his or her assets and liabilities to determine if they qualify for an offer. Next, the taxpayer needs to follow the IRS’ offer in compromise rules to determine the correct amount to offer.

A famous Hollywood actor provides an example of what not to do. Wesley Snipes recently presented the IRS with an offer in compromise. The offer translated to roughly 4 percent of his tax bill — offering $842,061 of the $23.5 million owed. After the agency investigated Mr. Snipe’s estate, they determined he did not include various assets when calculating an acceptable offer amount. This led the IRS to determine they could likely receive a greater payment from the actor than offered. Thus, his offer was rejected.   

No Comments

Leave a comment
Comment Information
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1629 K Street NW, Suite 300
Washington, D.C. 20006

Phone: 202-618-1873
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 410-497-5947
Fax: 888-235-8405
Annapolis Law Office Map

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 703-621-7169
Fax: 888-235-8405
Fairfax Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 240-599-5009
Fax: 888-235-8405
Rockville Law Office Map

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 443-743-3381
Fax: 888-235-8405
Baltimore Law Office Map