IRS Offer In Compromise

When you are faced with a large tax bill and you don't know what to do, you look around for debt repayment options and you try to understand what they all mean. You may look for a way to defend against IRS debt. Or another such way of dealing with your IRS debt is to use an Offer in Compromise (OIC).

According to the IRS, “An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.”

Do You Qualify for an OIC?

• If you can pay the full amount of the debt, you don’t qualify.
• If you have an open bankruptcy taking place, you will not qualify.
• If you can’t pay the application fee and 20% of the debt with your application, you will not qualify.

According to the IRS:

• Keys to Success in the Offer in Compromise Program include:
• Explore all collection options before submitting an offer in compromise
• Complete the "Is Your Offer in Compromise Processable?" checklist located in the Form 656-B, Offer in Compromise Booklet
• Submit all required documentation
• Complete all items on Form 656, Offer in Compromise
• Include all required fees and payments
• Be current with all filing and paying requirements (estimated taxes and federal tax deposits) and remain current
• Respond promptly to all requests for additional information
• Complete all items on Form 433-A or Form 433-B

Additionally the IRS states, “The objective of the Offer in Compromise (OIC) program is to accept an OIC when it is in the best interest of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements.”

OIC Payment Options:

• Lump Sum Cash Offer
• Short Term Periodic Payment Offer
• Deferred Periodic Payment Offer

The Offer in Compromise is one way to settle an IRS tax debt. Read further for more information on this debt repayment option. Additionally, whocanisue.com has the largest directory of trained IRS lawyers on the Web!

Factors to Note about an Offer in Compromise:

• You may not qualify.
• The IRS will keep levies made during the process.
• The IRS will keep refunds due.
• You are on a five year tax compliance program and if you do not file or pay your tax returns during that period, the OIC can be reversed.
• Tax liens are not released until all agreements and debt repayment obligations are met.

The IRS offers information on its website that explains the OIC and how to apply. You will need to complete Form 656, Offer in Compromise to submit to the IRS. For more information about the nuances of the OIC, you can read the IRS booklet, Form 656B, Offer in Compromise Booklet.

The IRS also provides this crucial information on their website:

• All Taxpayers Do Not Qualify for an Offer in Compromise
• Offer in Compromise Payments are Non-refundable
• Federal Tax Liens May Not Be Released
• Payments May Be Designated (you can tell the IRS how to apply the payments)
• Refunds (IRS will keep any refunds)
• Levies (“The IRS may also keep any proceeds from a levy that was served prior to the submission of an OIC, but which were not received at the time the OIC was submitted.”)
• Statutory Period for Collection Suspended
• Five Year Compliance
• There are OIC Payment and Application Fee Exceptions
• Appeal (if your application is denied, you can appeal)
• Mandatory Acceptance (IRS considers an offer accepted if it is not withdrawn, returned, or rejected within 24 months of the IRS receipt date)

Defending Against IRS Debt
Additionally, if you are considering an OIC, contact an experienced tax attorney to help you with your decision and the application process. The tax lawyer can advise you of all your IRS debt defense options and help you to avoid wage garnishment.

It is important to speak with an IRS attorney who specializes in tax law before making any hasty decisions. whocanisue.com can help you find an experienced financial lawyer in your area to assist you with OIC, tax liens, tax levy’s, how to file your taxes and/or extension paperwork, as well as assist in preparing an IRS debt defense should one be needed.