Question

Why is an offer in compromise usually the last collection alternative you should consider? Because extensive financial information is required. Because so few people qualify. Both 1 and 2. Neither 1 nor 2.

Answer 1

The correct answer is B, " Because so few people qualify."

If a person has few assets, little monthly income, and little or no prospects for future income, he may want to consider requesting an offer in compromise. An offer in compromise (OIC) allows the concerned person to settle the tax liability for less than the full amount owed. However, a major issue with offer in compromise is that not all people qualify for an offer in compromise. A taxpayer qualifies only if he or she cannot pay the tax in full with equity in assets or with monthly payments of disposable income before the collection statute expires.

Although financial information is required under this scenario, similar information would also be required other scenarios as well. Hence this cannot be considered as a reason for OIC to be the last collection alternative. The fact that only a few people are able to qualify for OIC is the sole reason for this option to be the last alternative.