Filing an offer in compromise is a great way to significantly reduce your back taxes with the Internal Revenue Service. However, it’s not as simple as filling out a few forms. To be successful with an offer in compromise, you need to plan ahead and pay close attention to detail.

The first step to being successful is really determining if you qualify for this program. I know this sounds simple enough, but determining your eligibility is not a simple matter. As it can take a person more than 20 hours to determine if they simply qualify for the program.

To determine if you qualify, you may need to fill out IRS Form 433 or 433-A, and these forms can be time consuming. These forms will require you to disclose all of your financial information. This includes all of your bank account information, such as names, addresses, and account numbers for all of your bank accounts. In addition, you must provide three months’ worth of statements on each account.

You will also need to disclose information about your vehicles, such as the VIN number, fair market value, and your auto loan balance. In addition, if you own any property, you will also need to disclose the fair market value of your property and the balance of the mortgage on your home.

This is just a sample of the information that must be provided to the Internal Revenue Service which they will use to determine if you qualify for the Offer in Compromise Program.

However, before you submit an offer to the tax authorities, you should know whether or not you qualify because there are steps you can take to qualify.

For example, let’s take John Smith, who owes the government $25,000 in back taxes. John owns a home or has an investment, but has $23,000 in a savings account and a 10-year-old vehicle that has 128,000 miles on it. If John were to simply submit an offer to the IRS with the above information, they would not approve the offer and take the entire $23,000 from John’s bank account.

However, if before submitting the offer, John purchased a new vehicle for $30,000 using the $23,000 in his savings account and obtained a car loan for $7,000. This would allow John to protect a large percentage of his asset from the offer in the compromise calculation and John would be a more favorable candidate to be approved for an OIC.

Preparing a successful offer in compromise is time consuming and technical in nature. If you have back taxes with the IRS and want to settle by making an Offer, then you should seek professional assistance from an experienced professional like the author of this article.