An Offer in Compromise (OIC) is a settlement agreement between you and the IRS that allows you to settle your debt for far less than you owe. It’s about as close as you can come to tax debt forgiveness. Although it may sound too good to be true, it is a legitimate tax relief option for those who qualify.
To make an Offer in Compromise request, you must submit a $205 application fee (non-refundable), Form 433-A (OIC) or Form 433-B (OIC), Form 656, and the initial payment (non-refundable). The initial payment will depend on the amount of your offer and the payment option you choose.
Lump Sum Cash Offer
Your initial payment will be 20% of the total amount you are proposing to pay the IRS. For example, if your OIC is for $10,000, you would include $2,000. The remaining $8,000 will be paid in five payments or less, if accepted.
Periodic Payment Offer
Under this type of repayment, your initial payment will be equal to one of your monthly payments. You must also make the proposed monthly payments while the IRS considers your OIC request. Once approved, payments continue until paid in full.
Getting approval for an Offer in Compromise is never guaranteed, but the IRS must give properly submitted requests fair consideration.
Offer in Compromise Qualifications
The IRS has strict qualifiers to determine who is eligible for tax forgiveness. The first thing they consider is your reason for applying. The IRS will only consider OIC if one of the following is true:
The IRS may have incorrectly determined the amount you owe
The tax debt is not fully collectible (your assets/income are less than the amount due)
Paying the tax debt would cause undue financial hardship (effective tax administration)
In addition, the following requirements must also be met before your Offer in Compromise is considered:
You’re up-to-date on all tax returns
You include an IRS bill for at least one tax debt in your offer
You’re not delinquent on any estimated tax payments for the current tax year (if applicable)
You don’t have an innocent spouse claim open with the IRS
The IRS is not currently auditing you
Your case hasn’t been sent to the Department of Justice
You’re not currently in bankruptcy proceedings
Business owners with employees also need to make all required federal tax deposits for the present quarter
If you meet the above qualifications for an Offer in Compromise or want to discuss other tax relief options, give Tax Defense Network a call. We can help you avoid costly mistakes, and find the best solutions for your tax problems.
Tax Defense Network
“We reviewed a lot of other companies out there and Tax Defense Network seemed to have the best reputation and feedback from their clients, so we just took the chance. It was a good choice. They got feedback to me very quickly and answered all my questions. They were very accommodating and understanding.
If I had tried to do it alone, I would never have been able to negotiate with the IRS. It’s certainly better than hiding in the shadows because I’m afraid of something happening. They cleared the way for me to plan better and pay my taxes.”
— Alfredo T.
Common Questions About Offer in Compromise
Q:Can I request OIC if I’m going through bankruptcy?
No. If you’re in an open bankruptcy proceeding, you are not eligible for an OIC. Once the case is discharged and closed, however, you may file an offer.
Q:Is there an Offer in Compromise calculator or tool I can use to see if I’m qualified?
Q:What happens if the IRS rejects my Offer in Compromise?
If the IRS rejects your OIC application, you may choose to appeal that rejection within 30 days. To make this IRS appeal, you’ll need to use Request for Appeal of Offer in Compromise, Form 13711.
If your appeal doesn’t work, and you still can’t pay the full amount of your tax liability, you still have some tax debt relief options. You could choose to apply for a payment plan or you might be eligible for Innocent Spouse Relief. A tax professional will be able to go over all your tax relief options to find the one that works best for you.
Q:How long does Offer in Compromise take?
Submitting an OIC application isn’t your typical tax negotiation situation. The IRS may take up to two years to thoroughly investigate your financials and the merits of your case before making a determination. Since the expiration date for your back taxes owed is 10 years from the date of assessment, the clock is paused for however long it takes for your request to be evaluated and a decision made.
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