If you’re facing financial challenges and owe money to the Social Security Administration (SSA), there is an option available to help alleviate the burden.
The IRS offer in compromise provides a way to settle debts for less than the full amount owed, making it easier for taxpayers to regain control over their finances.
What Is an IRS Offer in Compromise?
An offer in compromise is an agreement between a taxpayer and the SSA where the debtor proposes to pay a lesser amount than the total debt. The SSA might accept this settlement when:
- The full amount owed is impossible to collect due to the debtor’s financial condition.
- The cost of collecting the full debt is greater than the amount that would be recovered.
- The debtor’s financial situation indicates they cannot afford to repay the entire debt.
How the IRS Offer in Compromise Works
In this arrangement, the taxpayer submits an offer based on their income, assets, and expenses, proposing a payment they can afford. The SSA then evaluates whether paying the debt in full is feasible or whether a settlement offer would be more efficient.
If the SSA concludes that full recovery is not possible through costly legal processes or the debtor’s financial constraints, they may accept the offer.
Generally, if the proposed settlement is about 80% of the total debt, the SSA is likely to accept the offer, as it aligns with internal guidelines designed to reduce administrative burdens and facilitate easier payments.
Once an offer is accepted, the debt must be paid—typically within 30 days in one lump sum. Alternatively, installment payments can be arranged based on the taxpayer’s ability to pay and the SSA’s discretion.
Benefits of the Offer in Compromise
This option is especially beneficial for those with low income, high expenses, or limited pensions, where paying off the full debt could take years.
Through the offer in compromise, taxpayers can settle their obligations in months, easing their financial strain and allowing them to regain control of their finances sooner.
Important Considerations for the IRS Offer in Compromise
- Debt Over $100,000: If the owed amount exceeds $100,000, the SSA will refer the case to the Department of Justice, which will make the final decision on the offer.
- Discretionary Acceptance: Acceptance of the offer is not guaranteed and depends on a financial analysis of the taxpayer’s situation. The SSA can reject, delay, or request additional information before making a decision.
- Failure to Pay: If you fail to make the payments as agreed, the SSA can reinstate the full debt and continue collection efforts.
- Appeal Rights: There is no right to appeal the decision if your offer is rejected.
- Alternative Options: If you don’t opt for the offer, other options like suspending or terminating collection efforts, or reducing the recovery rate to below 10% per month, might be available.
The offer in compromise is a valuable tool for taxpayers struggling with debts owed to the Social Security Administration. It provides a way to settle debts for less than the total amount owed, reducing financial pressure and allowing taxpayers to move forward more quickly.
However, it’s important to understand the terms and conditions before proceeding, as acceptance is not guaranteed, and there are consequences for failing to meet the payment obligations.
FAQs
What happens if my offer in compromise is rejected?
The SSA may reject your offer if they believe full repayment is feasible or if the offer does not meet their financial analysis criteria.
Can I make payments in installments?
Yes, installment payments may be allowed based on your financial ability and SSA’s discretion.
Will my offer in compromise affect my credit?
While the SSA’s decision doesn’t directly impact your credit score, resolving the debt may help improve your financial situation and credit profile.