| Federal taxes are filled with intricate details, multiple | | | | the only one. There are a total of three types. The |
| rules, mounds of required paperwork and important | | | | first, based on financial strength, is called Doubt as to |
| deadlines. The added elements of health issues and | | | | Collectability. The second type is called Doubt as to |
| financial hardship can magnify the burden. There are | | | | Liability. This type of settlement centers on the inability |
| times that all of the difficulties of the process and of | | | | of the IRS to determine the truth in what is owed. This |
| life can lead to an inability to pay what is owed to the | | | | question arises due to possible errors made in the |
| Internal Revenue Service (IRS). The failure to pay | | | | audit, lack of evidence, or new evidence supplied by |
| leads to an audit, allowing the IRS to research the | | | | the taxpayer. Both parties recognize the problematic |
| situation and determine accountability of the taxpayer. | | | | outcome and reach an agreement on payment. The |
| Fortunately, the audit can lead to a settlement in the | | | | third type falls under the Executive Tax Administration. |
| form of Offers in Compromise. | | | | This is reserved for very rare situations where the |
| An Offer in Compromise is an agreement between | | | | taxpayer is capable of paying the debt, but has special |
| the IRS and the taxpayer to settle all tax liabilities for | | | | circumstances that require maintaining their assets. An |
| an amount that is less than originally owed. This is not | | | | example would be a family that has a very ill |
| an easy agreement to reach and is based on very | | | | dependent that requires lifelong care. The IRS will allow |
| strict guidelines. The officials will first verify if the | | | | the taxpayers to keep enough of their assets to |
| taxpayer has the assets to pay the total amount | | | | manage any necessary medical needs. |
| owed. This is called Reasonable Collection Potential | | | | Although the IRS is known for strict rules and |
| and incorporates all assets, including future income less | | | | indifference, there are opportunities to show valid |
| necessary living expenses. If the potential to pay does | | | | reasons for not paying tax debt. An Offer of |
| not exist, the IRS will agree upon an amount that the | | | | Compromise will establish a payment plan that will |
| taxpayer is able to pay. | | | | allow the taxpayer to remain legally and financially |
| An agreement based on the inability to pay is the most | | | | responsible. |
| common form of an Offer in Compromise, but it is not | | | | |