IRS Offer in Compromise (OIC) Page 2

Offers In Compromise (OIC)

Taxpayers across the country who come to us for help with their prior years' taxes can get quick help from us and we can help them with their decision about whether or not they should consider an Offer in Compromise. So if you are unable to pay your tax debt in full, and an installment agreement has been ruled out, then you might qualify for the IRS Offer in Compromise (OIC) program. Many tax attorneys and CPAs generally caution that the OIC program should considered as a final option, after taxpayers have researched and ruled out all other available payment options.

An IRS Offer In Compromise is an agreement between you and the IRS that will completely resolve your tax debt for less than the amount owed. A tax debt can be legally "compromised" for one of the following reasons:

Doubt as to Liability: This is where doubt exists that the assessed tax is actually correct. Although many taxpayers claim that they do not owe the tax, very few of them actually qualify for this reason. Since 1998,  we have never pursued an OIC based on this claim.

Effective Tax Administration: This is where there is no doubt the tax is correct, and no doubt that the amount owed could be collected, but some kind of an exceptional circumstance exists that allows the IRS to consider a taxpayer's OIC. Very few taxpayers will ever qualify for this OIC type, but occasionally we will happen upon one.

Doubt as to Collectibility: This is where doubt exists that you could ever pay the full amount of tax owed. Your expenses may be significantly higher than your income, or your income may be so low that IRS can easily see that they should not waste their time trying to collect from you, or you may be disabled or retired and your income may be very low. This is where virtually all of our successful OIC clients will qualify.

Virtually all kinds of taxes, penalties, and interest can be compromised. Even old and unpaid payroll taxes can be compromised. IRS accepts approximately 25% of all offers filed, so you can see that your chances of a successful OIC are not great.

Things to keep in mind:

• You must be compliant for two consecutive quarters (6 months) before an offer can be submitted. This means that all of your estimated tax payments must have been made and that all of your payroll tax deposits must have been made.
• The advantage of an OIC is that the amount paid is considerably less than what is actually owed.
• Principal and interest stop accruing while the OIC is being considered.
• Enforced collection is suspended while the OIC is being considered. This means that no IRS levies will be sent to your banks or employers.
• If your OIC is eventually accepted by IRS, you must be compliant for the next five years; compliant means that you must file all of your future tax returns on time and pay all of your taxes. If you do not remain compliant, your OIC will default and then IRS can go back and reject that offer and then you will suddenly owe the entire amount of the original tax, penalties, and interest. Obviously, you don't want this to happen.

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