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Obligations When You Win An Offer In Compromise With The IRS

Obligations When You Win An Offer In Compromise With The IRS

A few days ago, one of my friends, like many of us who want to buy our own house, began to apply for financing. He was frustrated when the real estate agent reviewed his credit history and reported that his record had a debt with the IRS of more than $450,000.

Indeed, a few years ago, he did owe that amount, and Jagg Tax Solution, Inc. successfully represented him before the IRS to negotiate an Offer in Compromise, which was accepted by the IRS. As such, he had to pay only $9,000, which was, as you can see, a small fraction of his total debt of $450,000.

When a person has a debt with the department of internal revenue and, for economic reasons, is unable to pay the said debt, this person can file an Offer in Compromise with the IRS. The offer you submit may be much less than the total amount you owe and must be supported by documents showing your financial situation and the reasons why you cannot pay.

Going back to the previous case, you may be wondering why our friend still owes the full debt if the IRS had already accepted his offer.
The Offer in Compromise is a contract that you sign and agree to comply with the tax law for the next five years. The tax law basically includes two points: (1) file your tax return on time and (2) pay your estimated taxes for the current year or make quarterly payments.

As you can see, if the two points that are indicated in the Offer in Compromise contract are met, the IRS extends the release of the lien one month after completing the payment of your offer and therefore the credit history will not show any more debt to the IRS.

The friend in this story asked Jagg Tax Solution, Inc. to investigate what had happened in his case, and it was found in his file with the IRS that he had violated the contract by not paying taxes for the subsequent years after accepting the offer. In other words, after filing his taxes, he tried to request a payment plan, something that is not acceptable based on what is stipulated in the contract that he signed with the IRS.

Unfortunately, these facts are real, and our friend could not buy the house. In addition, his debt to the IRS is currently over $500,000. A new negotiation was opened with the IRS and a successful solution is expected.

Taxes at the Wheel


Edic.: 183
Autor: Gustavo Nuñez
Date: 10/2022