Making ends meet when a tax debt is weighing you down can be a struggle. The idea of tens of thousands – or even hundreds of thousands of dollars – hanging over your head can be haunting. Add the constantly intimidating IRS notices and it can feel like there is no escape. Thankfully, your situation may qualify for special relief programs.
An Offer in Compromise (OIC) is a settlement agreement between you (the taxpayer) and the IRS that allows you to settle your debt for far less than you owe. It may sound too good to be true, and for many taxpayers, it is. If you qualify, this can be the fresh start that you have been waiting for.
Seeking a Settlement
The IRS doesn’t hand out OICs to just anyone seeking tax relief – you’ll be required to submit a detailed financial report that itemizes your revenue streams, monthly expenses, and more to prove you are unable to afford the full debt. If approved by the IRS, OIC conditions must be kept on your part or your settlement will be invalidated and all remaining liability will go back on your account.
Submitting for an OIC isn’t your typical negotiation situation – you can’t barter for a lower total, but the IRS will take up to two years to review your situation to be sure that they have thoroughly researched your unique situation. 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.
You’ll be expected to pay a reduced amount within a limited timeframe, and failure to do so can result in termination of your agreement, forcing you to start over. But you may have options – the IRS allows separate payment terms to meet your specific circumstances.
Turn to Tax Debt Resolution Professionals
Work with a tax debt resolution company to help weigh your options with the IRS and apply for an OIC, if advisable. Don’t be discouraged if your tax professional concludes that you aren’t a viable candidate for an OIC – there are plenty of other IRS resolution options that may be more suitable to your situation. Many people believe an OIC to be a quick fix to their liability; however, sometimes it can turn out to be far less advantageous than other options that are available.