What is an Offer in Compromise?
An Offer in Compromise (OIC) is simply an agreement between you and the IRS to settle the tax debt for less than the full amount of what is owed. You "offer" an amount that you can reasonably afford to pay, and the IRS "compromises" the remainder of the tax debt.
Who is qualified?
Is it available to everyone? No, only qualified taxpayers can settle their tax liability for less. Although originally intended for taxpayers experiencing severe financial hardship, IRS regulations changes of May 2012 allowed it to be a feasible option for a wider range of non-compliance scenarios.
Why would the IRS agree to an Offer in Compromise?
First and foremost, the primary goal of the IRS is to make all taxpayers compliant. They do this by helping you get back on track as a law-abiding citizen. Their secondary goal is to collect past due tax debts, so the IRS is willing to accept a lesser amount, if that is the most they can reasonably expect to collect from you. And, in return, you are promising to stay and remain compliant.
Offer in Compromise Scenarios
Doubt as to Collectibility - The taxpayer does not doubt that he or she actually owes the outstanding balance of tax debts, but a legitimate doubt exists that tax liability could be collected in full.
Doubt as to Liability - Used when the taxpayer doubts that he or she is actually responsible for the outstanding balance of tax debts. The taxpayer must submit a statement explaining why the tax liability is doubtful.
Effective Tax Administration - Used when the taxpayer is claiming that he or she is suffering an extraordinary hardship, such that paying the tax would be unfair and inequitable. The taxpayer does not doubt that he or she is responsible for the outstanding tax debts, and does not doubt that the IRS could probably collect the full amount of taxes. The taxpayer is simply claiming a significant economic hardship, such as serious medical problems or something life-threatening.
Knowledgeable tax professionals at IBA Tax Group are experienced in all aspects of the Offer in Compromise process, and can represent you before the IRS to get the best possible resolution. We are licensed nationwide to represent taxpayers before the IRS, no matter what US state you live in, we can help. Call us today for a FREE consultation.
See Frequently Asked Questions about Offer in Compromise here.