Offer In Compromise Tax Debt Relief

offer in compromise debt relief can help resolve your tax debt problems.

Your financial situation is different from anyone else. You should take the time to review this tax debt relief options guide to find the best solution for your needs and goals.

What Is Offer In Compromise?

If you owe the IRS money and have tried everything to pay it off, you can consider making the IRS an “offer in compromise” (OIC) to settle your tax bill. An OIC allows taxpayers to settle their tax debt by paying the IRS less than what they owe in back taxes. An IRS OIC is a tax debt settlement plan.

Who Is Eligible?

The IRS is generally reluctant to agree to offers in compromise. The IRS will do so when the Offer In Compromise represents the IRS’ best opportunity at getting the largest amount of debt possible from a taxpayer, within a reasonable amount of time. Since the IRS always seeks to collect as much of your tax debt as possible, only a small number of OICs are accepted each year.

The IRS Offer in Compromise review process is a detailed one. You are required to provide the IRS detailed information regarding your finances. Therefore, it is best to ensure you are a good candidate for the program before you apply. An unsuccessful OIC will only prolong the collections process (added interest and penalties) on your tax debt. Also, it provides the IRS additional financial information to enforce collections against you.

Eligibility Guidelines For OIC Status

eligibility guidelines for oic status

The IRS may accept an OIC based on one of the following reasons:

  • Doubt As To LiabilityA compromise meets this criteria only when there’s a genuine dispute as to the existence or amount of the correct tax debt under the law.
  • Doubt As To Collectibility – exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
  • Effective Tax AdministrationAn offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances,

What Happens Under OIC Status

what happens under oic status?

Once you receive IRS approval for your Offer In Compromise, the IRS expects that you will have no further delinquencies and will fully comply with the tax laws.  If you do not abide by all the terms and conditions of the OIC, the IRS may determine that the OIC is in default.

When the IRS accepts the Offer In Compromise it includes a requirement that you will file all tax returns and make timely payments of all taxes for 5 years from the date of acceptance of the OIC.   It the OIC is declared to be in default, the agreement is no longer in effect and the IRS may then collect the amounts originally owed (less payments made), plus interest and penalties. Additionally, any refunds due within the calendar year in which the OIC is accepted will be applied to the tax debt.

What Else Should I Know?

If the IRS rejects your Offer In Compromise, you have the right of appeal.  The IRS will send you a rejection letter explaining the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision.  The appeal must be made within 30 days from the date of the letter.

In some cases, an OIC is returned to the taxpayer rather than rejected.  This is because the taxpayer didn’t submit necessary information, filed for bankruptcy, failed to include a required application fee or nonrefundable payment with the offer, hasn’t filed required tax returns, or hasn’t paid current tax liabilities at the time the IRS is considering the offer.  Once current, the OCI may be submitted again for IRS review.

Thoughts On Offer In Compromise

An IRS Offer in Compromise (OIC) is a tax debt settlement plan. It allows taxpayers to agree with the IRS to settle a tax debt for less than what they owe.   Only a fraction of OICs are accepted each year.

Getting IRS approval for an Offer In Compromise  is a challenging task. It is strongly recommended that you have professional advice and representation when dealing with the IRS.

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