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What is an Offer in Compromise?

The IRS can grant an offer in compromise to people who owe large amounts of federal taxes that they have no way of paying. It is a solution to the debtor that reduces the total tax bill by a potentially huge amount, sometimes for pennies on the dollar.

It is basically a settlement negotiation just like a debt settlement company would do with unsecured debts like credit cards. The difference is that an offer in compromise must be done by a lawyer, accountant, or an agent who is licensed to directly negotiate an IRS compromise on a client’s behalf.

Most people who are granted a reduced tax bill through this system have proven to the IRS that they have no means to pay the debt. The situation usually involves a failed business venture, long term medical illness, or some other drastic life changing event that has caused the tax bill to grow beyond reason.