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IRS Offer in Compromise – Hope When You Can’t Pay.

If you’ve fallen behind on your taxes and can’t pay, the IRS may be willing to settle for lass than you owe.

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What is an Offer in Compromise?

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.


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

Not sure if you’re eligible for an OIC? Use our Offer in Compromise Calculator.

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Common Questions About Offer in Compromise