Austin Tax Blog


Due to several delinquent payers, IRS has already provided some sort of compromise or settlement for taxpayers to pay less than their prescribed tax liabilities. This provides a leeway for taxpayers to not be burdened by taxes. After all, the power to tax has the power to destroy.

With this, IRS has established certain criteria for taxpayers to avail this kind of remedy. The IRS has considered looking into taxpayers’ ability to pay his taxes, the extent of his income, the amount of expenses he incurred, and all his financial and other assets.

Therefore, it is quite clear that this remedy is clearly not available for everyone. The burden of proof lies on the taxpayer to prove that he has the right to avail of such compromise and settlements. This is why it is necessary for tax payers like you to know of what grounds to invoke in order to be able to lessen your taxes.

IRS Compromise and Settlement


The IRS needs to know the amount that you are willing to pay monthly in order to lessen your tax liabilities. You have the freedom to determine your payment arrangement when it comes to paying your taxes.

In order to properly determine you capacity to pay, the IRS usually asks for paystubs or your current earnings as well as your expenses. If you own a business, the IRS asks for declaration of profit and loss in your enterprise.


After knowing your capacity to pay and the amount you’re willing to incur, IRS will then look into your monthly income and your living expenses. These expenses will mostly include your bills in your household, your groceries, and your other purchase of necessities.

The IRS looks these into due to the fact that they are under the limitations of IRS. These are mostly referred to as Collection Financial Standards, which are more often than not considered as living expenses that are allowable.

The effect of determining this is to limit the amounts of your costs to such an extent that the IRS will deem it reasonable. The IRS then will minus these reduced expenses to your monthly income in order to finally determine your capacity to pay every month. Such amount will be subject to IRS’ determination to provide the remedy of compromise.

What is the IRS Compromise and Settlement


Lastly, the IRS looks into the possible appraisal value of all your assets. By assets, it means that everything you own is included. These assets can be your car, house, your lot, your retirement plans, insurance proceeds, jewelries, and many more. IRS will look into the worth of all your assets in order to determine just how much will be indicated in your compromise remedy.

After going through all this, it is still necessary to keep in mind that IRS tends to reject your petition most of the time and rarely are those lucky enough to get a compromise and settlement offer from the IRS.