SOURCE OF FUNDS
The taxpayer must make the IRS aware of how they are going to obtain the cash necessary to pay for their Offer.
IN FULL COMPLIANCE
The taxpayer must file all the tax returns they are legally required to file before submitting their Offer in Compromise.
ESTIMATED TAXES FOR THE CURRENT YEAR
The taxpayer must make all required estimated tax payments for the current year and if you are a business owner with employees, then you must make all required federal tax deposits for the current quarter before submitting your Offer in Compromise.
TRUST FUND TAXES
The taxpayer must pay in full the trust fund portion of any unpaid employment tax liability or the Trust Fund Recovery Penalty must be assessed on all responsible persons before submitting your Offer in Compromise. Trust fund taxes are the funds held from employees paychecks for federal income taxes, social security and Medicare taxes. If the employer does not pay this portion to the IRS, the business owner or other responsible persons may be held personally liable for the unpaid employment taxes.
BANKRUPTCY PROCEEDING
The taxpayer or the taxpayer’s business cannot currently be in open bankruptcy proceedings.
OTHER REQUIREMENTS
- Payment (or waiver) of a nonrefundable $186 application fee
- Submit the required supporting documentation along with IRS Forms 656 or 656-L, 433-A(OIC), and/or 433-B(OIC)
- Signing a collateral agreement, providing that the taxpayer will pay more if his/her income increases in the future, if the IRS requests this (which it rarely does) or providing that the taxpayer will not claim net operating losses on their tax returns in the future (usually for the next 5 years).
