Offer in Comprise

[jwmc1]

I have some federal tax debt and about half of it is interest and penalties. I have been paying on a installment agreement for awhile and I may be coming into enough money to pay half off. Do you think the IRS may accept an Offer in Comprise of 50% if paid all at once. Does anyone have any experience with this?

[ryan]

Years ago I owed a mid-size amount to the IRS. My accountant at the time talked about trying to do an Offer In Compromise..
What I recall is it was a pretty involved process, including proving up a lot of stuff about why they should even consider it.
Its not just how much you're offering, but the present state of your financial affairs. The prospect of how likely you are to continue making your payments and other factors.....I do remember there was lots of paperwork to submit and she (my accountant) even with all that, said half are rejected. Of course, I don't know what the outcome would have been as we never attempted it.

It still might be worth it for you to look into more tho, I don't mean to sound down on it.

[outsidetool]

I did an Offer in Compromise about 10 years ago with the IRS. Owed a total of about $14000, of which about $4k was penalty and interest. I had a payment plan at the time which was for $200/month. My finances were highly strained and I was going through a divorce. An IRS rep on the phone suggested an OIC to me, when I had called after getting a nasty-gram. I was 3 months behind on payments. The IRS rep actually mailed me all the forms to put together the OIC.
As I recall there were 2 initial criteria on which to base an OIC: 1) Question as to whether you actually owed the tax. 2) Financial hardship.
Your situation sounds a bit unique in that you'll be getting a chunk of money. How will they view that? If your financial situation is tough, and you can make a good claim to that effect and are willing to put your lump-sum money into an OIC, then I'd go for it. You really have little to lose. You would likely need to demonstrate that your situation is strained to be able to make payments even after half the debt is paid. There are several forms, but it's not rocket science.