An Offer in Compromise (OIC) is a formal, written agreement between a taxpayer and the IRS to settle a tax liability for less than the full amount owed. Many states have a similar program. An OIC can be based on “Doubt as to Collectability” (the taxpayer proves he or she is not capable of repaying the IRS tax debt in full), “Doubt as to Liability” (the taxpayer proves that there is some doubt as to whether the taxes should actually be owed) or “Effective Tax Administration” (typically the taxpayer proves some kind of hardship that warrants a tax settlement).
Doubt as to collectability (a financial demonstration that you do not have the ability to fully pay your IRS tax debt within a reasonable amount of time). The Internal Revenue Service uses a formula to determine an acceptable settlement amount. A cash offer may be made in which the taxpayer pays the settlement amount in full within 5 months of acceptance. Taxpayers who cannot afford to pay the lump sum cash settlement amount within 5 months of acceptance may be eligible for a installment payment arrangement whereby the settlement amount is paid off with up to 24 monthly payments.
In addition to “Doubt as to Collectability," offers may also be approved based on “Doubt as to Liability” (establish that there is some doubt as to whether the taxes should actually be owed) or “Effective Tax Administration” (demonstrate a hardship).
You may be eligible for an Offer in Compromise and not know it. Aggressive government collection agents might not tell you that you are eligible. Or, a seemingly friendly government agent may offer to “help” you prepare and process your own Offer in Compromise. The IRS collections will then frequently use its own formula against you to either reject your Offer or force you to settle for more than you should.
Our professionals know how to present an Offer in Compromise so that it has the best chance of being accepted. They know when and how to dispute an IRS rejection of an Offer as well. They also know when and how to dispute the settlement amount that the IRS wishes to approve. Contact our team for IRS tax help today.