Yes, I have done an offer in compromise. Use IRS form 656 which comes with the explanation of what to do with the form. My story is that according to the IRS, I owed them about $67,000 in back taxes and penalties.
This had been accruing for years and when I got married, I wanted to get something worked out with the IRS. So I filled out the form 656 and set up an appt with an IRS agent. He was very kind and helpful with filling out the form propertly.
Basically, what you need to do is show the IRS that you will not be in a position to pay the debt that they say you owe them. In my case, there was just no way with my income and my wife's small income that we could ever pay off my IRS debt of $67,000.
I gave them my situation in writing, our assets ($3,000), cash on hand of about $ 2,500 and our income. My income at that time was about $750 a month, my wife's income was $600 a month, and our rent was $100 a month. We had to pay car insurance for both cars and list all of our other expenses.
Our income was low at the time because my wife and I were serving full time in a non-profit ministry. But that was not the deciding factor for the IRS. Their decision was that based on our income we would not be able to pay the total amount owed.
I made an offer to them of $ 2,500 which was almost all of our immediate cash. They countered back at $ 3,500 and said that was there firm and final offer to complete an offer in compromise.
So we came up with the money and paid basically about 5 cents on the dollar to be rid of the huge debt. The other part of the agreement that you make with the IRS in this particular arrangement is that you will file your income tax report on time for the following 5 years and pay your taxes on time. If you fail in either of these stipulations, they can reinstate the original debt plus what you currently owe.
So if you do the offer in compromise and get it negotiated, report on time after that and make sure you pay your taxes. We did and we are free!
I hope this helps you. We filed back in 1999, but I don't think anything has changed since then with their procedure.
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