Community Tax can help you negotiate an Offer In Compromise with the IRS. An Offer in Compromise (OIC) allows taxpayers to settle their tax debt with the IRS for less than the full amount owed. If you can’t pay your full tax liability, or if doing so would create an undue financial hardship, this tax relief solution may be a legitimate option.
Settle your tax debt for less if you qualify for an Offer in Compromise
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Qualifying for an Offer in Compromise
The IRS may consider you eligible for an Offer in Compromisebased on three factors:
Effective Tax Administration: The IRS believes forced collection would cause undue financial hardship.
Doubt as to Collectibility: The IRS believes you don’t have the income or assets to pay the full tax debt before the statute of limitations ends.
Doubt as to Liability: There is doubt on the accuracy of the amount or whether you truly owe your tax liability.
A tax expert from Community Tax can advise you on whether you qualify for an offer in compromise, and, if so, help determine the amount the IRS would most likely accept to settle your debt.
Struggling under tax debt? You may qualify for an Offer in Compromise.
An Offer in Compromise is one of the most misunderstood IRS tax relief programs, but Community Tax can guide you every step of the way. Negotiating with the IRS on your own can be difficult. Without guidance from an experienced tax professional, you may end up paying more than you would have, or your OIC request may be denied. The IRS doesn’t make it easy to secure an Offer in Compromise, but experienced tax professionals can improve your chances of approval.
Comprehensive Tax Solutions with Community Tax
An Offer in Compromise can be a great tax resolution option, but it’s not right for every situation. If our tax experts don’t believe an OIC is an appropriate solution, we will help you examine all available tax relief programs to find the right fit for your needs. We’ve helped thousands of taxpayers settle hundreds of millions of dollars in tax debt - we can do the same for you.
FAQs
Offer in Compromise
What is an IRS Offer in Compromise?
This term refers to a tax settlement option offered by the IRS to taxpayers who cannot pay the full amount of taxes owed. It is only offered if the IRS deems the full debt owed unpayable, and impossible to pay off through payment plans, and will only be accepted if the IRS believes the offer being made is greater than or equal to a sum they could ever truly expect to receive from said taxpayer.
Do I qualify for an Offer in Compromise?
There are three main qualifications that the IRS will consider.
Doubt as to Collectibility
This qualification comes about if the IRS assumes reasonable doubt that the amount owed can be
collected in the foreseeable future through usual collection procedures. To determine eligibility
under these terms, the IRS considers several facets.
First, they decide whether they would be able to collect a higher amount through forced
collections than if they accepted the Offer in Compromise. If the OIC won’t garner them a higher
amount, then it will likely not be accepted.
To prove you cannot pay the amount owed, the IRS will look at your net equity in assets along
with your projected monthly disposable income—this is known as reasonable collection
potential, or RCP. If your RCP won’t see your debt paid in full before the collection statute
expires, the IRS is more likely to accept your offer. The IRS will also consider the likelihood of
the taxpayer’s financial situation improving. If it looks likely that it will, they may reject the
offer and wait for the full amount to be paid.
Doubt as to Liability
This refers to doubt that the assessed tax liability is correct. This may be due to examiner error of
the tax code, it may be that the examiner neglected to utilize all the evidence presented, or it
could be that the taxpayer has found new documents to prove the debt assessed was incorrect.
Effective Tax Administration
Unlike the aforementioned causes for OIC approval, in the case of effective tax administration,
there is no doubt regarding the stipulated tax amount owed. However, there may be individual
circumstances that would mean forced collection would cause financial hardship, in which case
the IRS would more likely consider accepting a taxpayer’s offer.
Other Stipulations:
To qualify, you must be up to date with your tax filing, and not be involved in an open
bankruptcy proceeding. You’ll also be required to describe your financial situation in details,
which may necessitate pulling spousal financial reports.
How long does an Offer in Compromise take to process?
This varies based on the situation, but most OICs are processed within several months’ time.
There is no guaranteed timeframe for an IRS Offer in Compromise proceeding. It can take the
IRS up to seven months to fully process your request, whether the outcome is acceptance or
rejection.
During this decision process, taxpayers are still expected to make payments on any pre-existing
plan, including the plan offered within your request. You will also still receive penalties during
this period, but collection processes are paused during the deliberation time.
Can I request an Offer in Compromise on my own?
Filing for an IRS Offer in Compromise is complex; as such, it behooves those looking to find the
best arrangement with the IRS to use a tax professional. There are various forms required, and
the huge levels of documentation can make the process more complicated for those not well-
versed in tax filings.
Beyond the multiple forms required, you’ll also be required to provide documentation of at least
three months’ worth of income and expenses, including, but not limited to, housing costs, credit
card statements, pay stubs, tax returns, health care, dependent care, and more. This gets even
more complex should the Offer in Compromise refer to business taxes.
How do I pay an Offer in Compromise?
There are various payment plans to utilize should an Offer in Compromise be accepted, and your
preferred payment option must be specified when you place your offer. These plans include a
lump sum payment, or a periodic plan in which payments are made each month until the new
agreed upon balance is paid off. A tax professional can help you determine which plan would
work best for your circumstances.
What if I also owe state back taxes?
Not all states have Offer in Compromise deals in place and if they do, the requirements are
generally different from those imposed by the federal government. If you would like to file for an
Offer in Compromise from the state, you will have to do so separately. If your IRS OIC is
accepted, it’s likely your state request will also be approved, but this is not assured.
Can my Offer in Compromise be defaulted?
Yes. If your offering is accepted, you are expected to file your taxes and stay up to date on
payments for five years following. Failure to do so could result in an OIC default, making you
liable for the original debt, along with any additional fees and penalties that may have accrued in
the time since.
What if my Offer in Compromise is rejected?
If your OIC is rejected and you believe the IRS is wrong about your case, you can appeal the
decision for up to 30 days after the initial rejection. If you have come into more evidentiary
support for your case in the time following your original request, you’ll likely want to appeal and
include this new information.
Is filing for an OIC expensive?
If your Offer in Compromise is accepted, the money saved by using a tax professional’s help is
more than any fee you can expect to pay for filing services.
Is an Offer in Compromise the best solution?
Filing for an OIC is not without its drawbacks. It requires copious amounts of documentation,
can take a while to process, and involves high levels of scrutiny, making it a potentially difficult
and intrusive process. Despite these roadblocks, an Offer in Compromise can and has made a
huge difference in the lives of many facing insurmountable debt.
Hiring a professional is the best way to determine whether or not you qualify for OIC provisions,
and gives you the best chance of settling your debt in a timely and reasonable manner.
Community Tax has helped many clients receive fair and due IRS Offer in Compromise deals,
erasing thousands of dollars in debt and ensuring our clients get out of hot water with the IRS.