Virginia Offer in Compromise: What You Need to Know

Jill Bridges
Expert Contributor
Last Updated:
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  • A Virginia offer in compromise is one solution for settling your back taxes for a smaller amount than your actual tax burden.
  • Before accepting an offer in compromise, the IRS examines your finances to make sure they cannot collect the full amount that you owe.
  • Offers in compromise are the best option for taxpayers who do not have the money to enter into an installment agreement without creating a financial hardship.

Getting out of back taxes can seem impossible, especially if you owe the Internal Revenue Service a large amount of money. Fortunately, there are several different ways that you can pay off your back taxes, including something known as an offer in compromise.

Essentially, an offer in compromise is a way that you can settle your back taxes to the IRS for less than the amount that you owe, making it easier for you to pay off your tax burden. Not every taxpayer is eligible for a back tax assistance solution, however, and even if you do qualify, having your offer accepted can be difficult. Here are a few things that you need to know about a Virginia offer in compromise if you’re interested in using this back tax assistance solution.

Qualifying for an Offer in Compromise

If you’re interested in resolving your back taxes with an offer in compromise, you first need to determine if you are qualify for this solution. Taxpayers can qualify for an offer in compromise in three primary ways:

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  1. Your back taxes is uncollectible.
  2. If your liability for your back taxes is in question.
  3. Collecting your owed back taxes would create a financial hardship or unfair result.

In most cases, taxpayers make an offer in compromise because they simply don’t have the money to pay off their back taxes, making it uncollectible. If you want to make an offer due to non-collectibility, you should be prepared for the IRS to fully examine your finances. In addition to examining your income and expenses, the IRS will research your assets to see if there’s anything you could sell, such as a car or home, to pay off your back taxes.

Virginia Offer in Compromise: What You Need to Know

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An offer in compromise should generally be your last resort for paying off your back taxes. If you do have the ability to make some payments to the IRS, requesting an installment agreement is usually the better solution. On the other hand, if paying the IRS would make it impossible for you to cover your living expenses, an offer in compromise may be your best choice.

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Submitting Your Offer in Compromise

Preparing your offer in compromise can be very complicated. A variety of documents need to be filled out and submitted, and you will also need to determine what type of payment solution is right for you. IRS Form 656 is the first document that you’ll need when making an offer in compromise. On this form, you will make your actual offer, meaning the settled amount that you are proposing to the IRS.

You will also need to file Form 433-A if you are an individual or Form 433-B for a business. Both of these forms are called Collection Information Statements, and they give the IRS the ability to review your financial information to make sure that you are actually eligible for an offer in compromise.

When you submit your offer in compromise, you will need to pay a $186 filing fee, as well as an initial payment. The amount of your initial payment will depend on what type of offer you are making to the IRS.

If you are making a lump-sum cash offer, then your initial payment should be 20% of your proposed settlement amount. After the IRS accepts your offer, you would need to pay the remainder of the settlement in five payments or less.

For a periodic payment offer, meaning you’ll pay your owed back taxes in monthly installments, your initial payment should be whatever amount you’ve decided to pay each month. Once the IRS has accepted your Virginia offer in compromise, just keep making your monthly payments until your obligation is cleared.

Generally, the IRS will accept an offer in compromise if the amount you offer them is the most the agency believes it can collect from you. If the IRS believes that it can collect more than what you’ve proposed, your offer will likely be rejected.

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Several events will take place while the IRS evaluates your offer. First, while the IRS may place a tax lien on your property, they will stop other collection activities until a decision has been reached. The IRS will also extend the assessment and collection period related to your back taxes. Even if your offer has not yet been accepted, be sure to make all payments related to your offer. If the IRS doesn’t make a decision within two years of receiving your offer, it is automatically accepted.

If the IRS rejects your offer, it isn’t the end of the road. You have the option of appealing the rejection by filing Form 13711 within 30 days. On this form, you will need to explain why you disagree with the rejection and why your offer should have been accepted.

Offer in Compromise Pros and Cons

To determine if an offer in compromise is the right option for you, it’s a good idea to examine some of the pros and cons of this back tax assistance solution. The biggest advantage of an offer in compromise is that it will halt IRS collection activities. While the IRS considers your offer, it will not garnish your wages or seize your property, although it still may place liens on your property.

One of the drawbacks of an offer in compromise is that it pauses the statute of limitations for your back taxes. So, if the statute is almost expired and you make an offer, it means the IRS has additional time to collect your back taxes.

Another drawback is that making an offer in compromise exposes your finances to ongoing scrutiny from the IRS. For instance, while considering your offer, the IRS may find that you do have the money to pay your full back taxes, possibly causing them to levy your bank account or garnish your wages.

If you’re ready to finally pay off your back taxes, Solvable is here for you. We provide a library of research articles that can help you better understand back taxes and back tax asssitance solutions, and we also review the most popular back tax assistance companies to help you find the company that can best help you with your back taxes.

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Jill Bridges
Expert Contributor
Last Updated: