When you can't pay the taxes you owe, the Internal Revenue Service, or IRS, (I-R-S), offers several options. You can file for an extension to give you more time to pay; you can arrange a repayment plan; or you may exercise your right to an Offer in Compromise. The IRS defines an Offer in Compromise as 'a binding agreement between...the Internal Revenue Service...and the taxpayer that legally compromises taxes owed.' What this means is that the IRS may accept less than half the amount of taxes you owe. As you might expect, such an offer has certain restrictions on who is entitled to be pardoned. The release of tax liability is available when there's uncertainty about either your liability of owing the taxes or to the IRS' ability to collect the taxes from you. If there's doubt as to whether the IRS can recover the taxes due, you must make an offer to the IRS based on what you can afford to pay. You need to justify the amount you're offering by revealing the value of your assets as well as your projected income. Being involved in bankruptcy proceedings disqualifies you from obtaining an Offer in Compromise based on the IRS' inability to collect from you. To find out if you qualify for this special provision, contact a tax professional for more information.
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