If the tax you owe is from an audit you didn’t know about or weren’t able to present any information for, you might be able to get an audit reconsideration. If you made a mistake on your return, filing an amended return may remove the debt. Most options are easier and less time consuming than submitting an offer, so it’s worth seeing if there is anything else you can do to resolve the debt before filing an offer.

If you’ve exhausted other options, and you think an offer is the best action, you can submit Form 656L, Offer in Compromise (Doubt as to Liability). You should include a written statement explaining in detail why you believe the IRS is in error and attach supporting documentation. There is no application fee for this type of offer, but you must offer more than zero dollars.

If you agree you owe the tax and you decide to submit an offer, you’ll need to give the IRS complete financial information. Make a list of your income, expenses, assets and any debts owed against those assets. Follow the instructions in Form 656B Booklet, Offer in Compromise Booklet, to prepare and file your offer.

You’ll have to pay an application fee of $205 and make offer payments (based on the method you choose) with your offer submission, unless you meet certain low-income guidelines, which are in the IRS OIC Booklet.

Your offer may not be processable

The IRS will use the criteria below to determine if it can process and investigate your offer. If the offer meets one of the criteria, the IRS won’t process your offer and will return it to you. The IRS will send you a letter explaining why it could not process your offer and will return your application fee. Any payments you submitted with your offer will also be returned, except for criteria numbers five, six and seven. Under criteria five, six and seven any offer payments will be applied to the amount you owe.

The IRS will not process your offer if:

1. You are currently in bankruptcy.
2. Your case is in the jurisdiction of the Department of Justice.
3. You don’t have a balance due.
4. The IRS can’t enforce your tax debts because the time the IRS has to collect has expired. You are not current with estimated tax payments or if you own a business and have employees you are not current with federal tax deposits for the current quarter and the prior two quarters.
5. You have past due federal tax returns.
6. You did not make both the application fee and the required initial payment.

After the IRS processes your offer

If the IRS processes but closes your offer without accepting it, it will not return your application fee or any other payments you made with the offer. The IRS will apply these non-refundable fees and payments to the amount you owe.

The IRS usually has ten years from the date of assessment to collect a tax debt. However, filing an offer will extend the time the IRS has to collect all your debt.

While the IRS generally puts other collection activities (such as a levy on your wages or bank account) on hold while your offer is pending, the IRS may still file a Notice of Federal Tax Lien to protect its lien interest in any property you own and to notify other creditors of that interest. You have the right to appeal any lien or levy collection actions.  Please refer to the What are my Rights? section below.

The IRS will keep any refund, including interest, for tax periods extending through the date that the IRS accepts your offer.

The IRS is required to explain how it calculates your ability to pay and how much it could potentially collect from you. You’ll receive correspondence and be able to contact the offer examiner or specialist assigned to you.

If the IRS rejects your offer

If the IRS rejects your offer, you have the right to appeal the rejection, but must do so within 30 days of the date of the IRS’s rejection letter. To appeal a rejection, use IRS Form 13711, Request for Appeal of Offer in Compromise.

If the IRS accepts your offer

If the IRS accepts your offer, you’ll need to abide by the terms you agreed to and stay current with filing and paying your taxes for five years after that.

If the IRS returns your offer

The IRS may return your offer after it is processed, if you don’t timely file your tax returns, make estimated tax payments, properly adjust your tax withholding or make federal tax deposits. In addition, the IRS may return your offer, if your application fee or offer payment is dishonored, or if you don’t provide information the IRS requested. If the offer is returned, you won’t be able to an appeal. However, IRS will send you a notice providing you 30 days from the date of the notice to respond to the IRS asking for reconsideration of the decision to return the offer.

Make sure you don’t owe taxes next year

If the IRS accepts your offer but you don’t file and pay all taxes on time for the five years after the acceptance, the IRS will notify you your offer is in default and may terminate the offer and you’ll owe your full debt (not the reduced amount of the offer).

Here are some ways to make sure you can pay your taxes

• Increase your tax withholding from your pay, by filing IRS Form W-4, Employee’s Withholding Certificate, with your employer.

• • New Tax Reform implementation changed the way the IRS calculates your federal tax. The IRS encourages everyone to perform a quick “paycheck checkup” to ensure you have the right amount withheld.

• • You may use the IRS withholding calculator to figure your federal income tax and withholding. The withholding calculator is a tool on IRS.gov designed to help you determine how to have the right amount of tax withheld from your paychecks.

• • When you use the withholding calculator, it will help you determine if you need to adjust your withholding and submit a new IRS Form W-4, Employee’s Withholding Allowance Certificate, to your employer.

• Increase the amount of estimated taxes you pay.