If you’ve fallen behind on your taxes and can’t pay, the IRS may be willing to settle for lass than you owe.
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.
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.
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.
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:
In addition, the following requirements must also be met before your Offer in Compromise is considered:
Not sure if you’re eligible for an OIC? Use our Offer in Compromise Calculator.