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Offer in Compromise

Offer in Compromise is an IRS program that allows you to settle your tax liability for less than you owe. Many people are not eligible for an offer in compromise; make sure to stay away from companies that promise you an offer in compromise, without first thoroughly investigating and analyzing your tax situation, and preparing the necessary forms for the IRS. An offer in compromise is a great option if you qualify, and can help saves you thousands of dollars off of your tax liability.

The three types of Offer in Compromise’s are;

Doubt as to Collectability
If the IRS determines that you cannot pay the full amount, they will settle for a lower amount.
Doubt as to liability
The IRS will work with you if you can prove that you are not liable for the tax debt.
Effective Tax Administration
Extreme economic hardships or circumstances. This type of Offer in Compromise is very rare.
The IRS will only accept an Offer in Compromise if the amount that is offered is the maximum amount they can collect over that period. The IRS strongly advises that you seek all other payment options before submitting an Offer in Compromise.

Am I Eligible?

To find out if you are eligible you must be current with all of your filings and payments, if you are in bankruptcy you’re automatically ineligible. An offer in compromise is very strict, and based on your expense worksheet 433-A for personal, and 433-B for business, along with the supporting documents.

The Process

To begin you will have to submit the following documents;
  1. A complete financial statement - IRS Form 433-A (Personal) or 433-B (Business) along with supporting documents to back up what you have stated in your form.
  2. Form 656 – Offer in Compromise Form
  3. $150 application fee (Non-Refundable, if the offer does not go through it will get applied towards your back taxes)
Choose a payment option:
  1. Pay 20% with your application, and the rest of your offer in 5 payments. IF your offer is not accepted that money will be placed towards your liability.
  2. Make the first payment with your proposed plan, and continue to make payments while your cases are being evaluated.
  3. The IRS usually gives you 12-24 months for a payment plan, unless you can prove a hardship then they will give you the remaining period of enforcement to pay off the debt.
While the IRS is reviewing your offer;
  1. All fee’s and payments will be applied to your tax liability. If you wish you can designate the payments to a specific year and debt;
  2. A notice of Federal Tax Lien may be filed;
  3. Other collection actions such as wage garnishments, and bank levies are suspended,
  4. The Statute of limitations is extended;
  5. You are required to make all the payments on any existing payment or installment plan; and
  6. Your offer is automatically accepted if the IRS does not respond within 2years from the date of their receiving it.
Final Step
  1. If the IRS accepts your offer;
    1. You must make sure that you are compliant with the terms of an offer in compromise, as instructed in IRS Form-656.
    2. Any refunds due this year will be applied to the tax debt; and
    3. Your tax lien will not be removed until you have paid of the settlement in full.
  2. If your offer is denied you have 30 days from the notice of denial to appeal.

Get Professional OIC Help

Submitting an offer in compromise is a complicated ordeal, and takes lots of paperwork, financial information, and knowledge of the IRS procedures. It is highly recommended that you have a professional handle it for you, someone who is experienced working with the IRS collections and appeals department. A properly prepared and negotiated offer in compromise can drastically reduce your tax liability, while an offer that gets denied, can place you in an even worse situation.

Free Tax Consultation

Tax works with tax attorneys, CPA’s, Enrolled Agents, former IRS agents, and tax relief specialists who can assist you preparing and filing an offer in compromise. Having a professional who can let you know if you qualify for an offer in compromise or other IRS tax relief program will save you time, money, and headache. To talk with a tax specialist and see if you qualify for an offer in compromise, or other IRS tax relief program; contact us online, or call us at 888-241-0002, and find out what you may be able to save.
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