You may be eligible to settle your tax debt for less than you owe. An IRS Offer in Compromise (OIC) is a program offered by the Internal Revenue Service that permits the government to accept less than what is owed on a tax liability.
You should be fairly certain that you are in fact a good candidate for the program before you submit an OIC to the IRS. The Internal Revenue Service will either approve or reject your OIC based on two factors:
- Income of the taxpayer
- Assets of the taxpayer
If the IRS determines that the client’s income or assets is not sufficient to cover the tax liability, the OIC has good chance of acceptance. However, when a taxpayer possesses assets that would sufficiently cover the tax liability, the IRS will reject the OIC. The basic premise for the IRS to approve an offer is that acceptance of the offer will be in the IRS’s best interest, not necessarily in the best interest of the taxpayer.
What You Should Know About an IRS Compromise
Many firms promote the OIC program to unqualified taxpayers. It is important to realize that both the approval process and the factors associated with the calculation of tax debt by the IRS are complicated and time consuming. In addition, if the OIC is submitted, and does not have grounds for being accepted, the taxpayer will incur additional interest and penalties that continue to accrue. Even worse for the taxpayer, the time period for the IRS to collect the debt can be extended, and the option to discharge the taxes in bankruptcy can be delayed.
Our firm is constantly contacted by new clients who were incorrectly advised by unqualified professionals about an OIC. Most commonly, these “firms” charged exorbitant fees to taxpayers who were otherwise unqualified OIC applicants, and caused irreparable damage to the severity of the taxpayers pending situation. For more information about an OIC, please call 1.800.777.3800 or contact TaxFirm.com.