Taxpayers can make a debt settlement fit their finances even after the IRS has accepted an offer. If you received a debt settlement after you made an offer to compromise and you still can not pay the agreed amount, you can propose the IRS compromise this settlement. The IRS needs a letter to decide your case.
Table Work Kit.
Financial records on current assets
Estimate of future income
IRS tax bill
Original Offer to Compromise
IRS Acceptance of Offer to Compromise
Typewriter, or computer word processor
Step 1. Collect information and documents. Ready your financial information that you can use to calculate your ability to pay. Prepare any information useful for writing your reasons for a reduction.
Step 2. Calculate the amount you will offer. The amount you offer must be at least the amount you can pay from current assets and future income. Use your current assets and potential income to calculate the amount you are able to pay.
Step 3. Write a proposal to compromise the debt settlement. No forms are used. Write the proposal in a letter addressed to the Commissioner of Internal Revenue Service. Use the required IRS pattern Letter 1603(p) for the letter form. This pattern is found in the Internal Revenue Manual, Section 5.8.9, Exhibit 1. Visit www.irs.gov to find the manual. In the letter, state the amount you offer for compromise and explain your reasons for requesting a compromise of a settlement.
Step 4. Send the proposal to the IRS office that accepted Offer to Compromise. Consider sending a payment with the letter. If the proposal is accepted, a payment will be required.
- When you make a proposal, you have three options for payment: pay the entire proposed amount, pay part of the proposed amount and then pay the remaining amount when the notice of acceptance is received, or pay the full proposed amount within 10 days after receiving the acceptance.
- Consider your reasons to request a reduction carefully before making a proposal. Acceptable reasons for the second compromise include: inability to pay the amount in 10 years, payment will put you in economic hardship, advanced age, and serious illness you are unlikely to recover from.
- The IRS calls the debt settlement offers an offer in compromise.
- The IRS has only one reason for compromising a settlement the service accepted after you made an Offer to Compromise, “Doubt as to Collectability.” In these cases, the IRS doubts you can ever pay the amount. The amount you owe must be greater than your current assets and future income. The other reasons accepted for an initial Offer to Compromise are not acceptable for a second compromise.
IRS Publication 594.
IRS Form 656b.