How to Submit an Offer in Compromise for Tax Relief

OFFER IN COMPROMISE

URGENT: How to Settle Your IRS Debt

The Offer in Compromise Program also known as OIC

When unable to pay back tax debt due to hardship, an Offer in Compromise (OIC) will allow you to minimize debt such that it does not harm your perspective.

An IRS Offer allows you to settle your past tax debt for less than the full amount you owe and maybe the right IRS tax resolution for your needs.

Offer In Compromise
An Offer-in-Compromise is an agreement where the IRS agrees to accept less than the total amount owed to it and the taxpayer agrees to pay the amount negotiated, as well as maintain his or her tax compliance for 5 years following the acceptance of the Offer-in-Compromise (“Offer”).

The first step in settling any tax liability is to determine your financial situation and assess your ability to pay.

When individuals face the complexity of their tax situations, consulting an experienced tax professional becomes essential.

These professionals meticulously analyze each option available, taking into account the unique circumstances of every taxpayer.

Their expertise not only helps taxpayers dodge potential obstacles that could complicate their financial lives but also aids in establishing the most favorable collection plan with the IRS.

Such strategic planning is not just about avoiding trouble; it’s about financial optimization.

By tailoring the approach to the individual’s specific needs and challenges, a tax professional can bring about significant savings, both in terms of money and emotional distress.

The result is a smoother path through the often-thorny process of tax compliance, ensuring that taxpayers find themselves in a better financial position.

This level of guidance is invaluable, offering peace of mind and tangible economic benefits that far outweigh the costs of professional tax services.

Ultimately, this professional assistance transforms what could be a stressful ordeal into a manageable, and even beneficial, financial strategy.

The forms commonly utilized for this purpose include Form 433-A OIC, Form 433-B OIC, and Form 656.

The Internal Revenue Service (IRS) offers a compromise pre-qualifier tool to assist individuals in determining their eligibility for potential compromise agreements with the agency.

If you're not facing financial difficulties, you might need to arrange installment payments to cover the taxes you owe.

An IRS Offer in Compromise (OIC) represents a formal proposal by a taxpayer to settle their outstanding tax liabilities for a sum less than what is fully owed.

This approach is grounded in a principle known as reasonable collection potential (RCP). The RCP is a comprehensive evaluation of the taxpayer's ability to pay, considering their income, expenses, and the equity in their assets.

Such a settlement option may be particularly suitable for individuals for whom paying the full amount of their tax debt would not be feasible, either due to financial constraints or because it would plunge them into significant financial hardship.

To accurately assess whether an Offer in Compromise is the appropriate course of action, the IRS conducts a thorough evaluation of the taxpayer's financial situation.

This includes a detailed review of:

1. Your Ability to Pay: This is a fundamental assessment to understand the maximum amount you are capable of paying towards your tax debts without causing undue hardship.

2. Your Monthly Income: An analysis of your income helps the IRS gauge your financial capacity and how it might affect your ability to settle your tax debt.

3. Your Basic Living Expenses: Recognizing that every individual has essential living expenses, the IRS considers these costs to ensure that the offer leaves you with sufficient funds to cover your basic needs.

4. The Equity in Your Assets: Finally, the IRS examines the value of your assets to determine if they can be utilized towards settling your tax debt.

The overarching goal is for the IRS to ascertain whether the offer accurately reflects the maximum amount that can feasibly be collected within a reasonable period, without causing undue hardship to the taxpayer.

Generally, an offer is more likely to be accepted if the IRS is convinced that it represents the most it could hope to collect from the taxpayer, considering their financial reality and without extending the collection process over an excessively long period.

It is important to approach the offer in compromise with a clear understanding of these factors and a realistic assessment of your financial situation.

For many, this option can provide a much-needed pathway out of tax debt, striking a fair compromise that respects both the individual's circumstances and the government's need to collect owed taxes.

You don't need a tax lawyer to submit an offer

While a tax lawyer is not necessary to submit an OIC, individuals and businesses may benefit from consulting with a tax professional.

TheCPATaxProblemSolver can help you navigate the complexities of the OIC process and ensure that all eligibility requirements and compliance obligations are met.

A tax professional can provide valuable guidance on preparing the application, selecting the appropriate payment option, and managing any post-acceptance compliance requirements to maximize the chances of a favorable outcome.

How to File an IRS Offer In Compromise

The IRS Offer in Compromise package is detailed and extensive. It requires you to reveal all your financial details to the IRS.

Therefore, it’s important to be confident in your approval before applying.

A rejected OIC can actually make your debt situation worse.

It gives the IRS all the information they might need to pursue your debts more aggressively.

If the IRS turns down your OIC, they’ll have a complete understanding of your finances, including your income sources, bank account locations, and assets.

Should your OIC be denied and the IRS decide to take collection action, they’ll know precisely how to proceed.

offer in compromise

Estimated Time to Complete 360 minutes

Application Fee USD 205

What are Things Needed ?

- Financial Records
- Specific Instructions for Form 433 A OIC and Form 656

Recommended tools to file Form 433 A OIC and Form 656 :

- A Computer.
- Internet connection.
- Pdf program

Steps to Submit an Offer to the IRS

Make Sure You Are Eligible

The IRS will return any newly filed OIC application if you have not filed all required tax returns and have not made any required estimated tax payments.

Any application fee included with the OIC will also be returned.

Any initial payment required with the returned application will be applied to reduce your balance due.

This policy does not apply to current year tax returns if there is a valid extension on file.

You are not eligible if you are in an open bankruptcy proceeding.

Use the Pre-Qualifier Tool to confirm your eligibility and prepare a preliminary proposal.

IRS Tax Debt Relief Questions
Submit your offer

You'll find step-by-step instructions and all the forms for submitting an offer in the Booklet, Form 656-B PDF.  Your completed offer package will include:

  • Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
  • Form 656(s) - individual and business tax debt (Corporation/ LLC/ Partnership) must be submitted on separate Form 656;
  • $205 application fee (non-refundable); and
  • Initial payment (non-refundable) for each Form 656.
Offer In Compromise
Select a payment option

Your initial payment will vary based on your offer and the payment option you choose:

  • Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. If your offer is accepted, you will receive written confirmation. Any remaining balance due on the offer is paid in five or fewer payments.
  • Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.

Understand the process

While your offer is being evaluated:

  • Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
  • A Notice of Federal Tax Lien may be filed;
  • Other collection activities are suspended;
  • The legal assessment and collection period is extended;
  • Make all required payments associated with your offer;
  • You are not required to make payments on an existing installment agreement; and
  • Your offer is automatically accepted if the I
If your offer is accepted
  • You must meet all the Offer Terms listed in Section 7 of Form 656, including filing all required tax returns and making all installment payments
  • Any refunds due within the calendar year in which your offer is accepted will be applied to your tax debt;
  • Federal tax liens are not released until your offer terms are satisfied; and
  • Certain offer information is available for public review by requesting a copy of a public inspection file.
If your offer is rejected

We can quickly determine if the Offer In Compromise program suits you, thanks to our knowledge and experience.

Choosing our tax experts ensures your peace of mind and you will be in good hands.

Pay less than what the IRS says you owe!

We're up-to-date on all Offer in Compromise (OIC) administrative procedures and tax laws.

We have powerful strategies at our disposal, including special circumstances cases and appeals.

We understand that a well-thought-out and strategic approach is key to our continued success in achieving OIC approvals.

If you're eligible for the OIC program, you could save a significant amount on taxes, penalties, and interest.

This program allows for negotiations on all types of taxes, including most payroll taxes.

The OIC program is designed for those who owe more to the IRS than they can afford, offering a chance to settle for a lesser amount as a complete resolution.

The "Doubt as to Collectibility" (DATC) Offer is based on your financial ability to pay, considering your income, expenses, and asset equity.

Additionally, the OIC program provides an opportunity for those who dispute the amount owed or believe their taxes were miscalculated to file a "Doubt as to Liability" (DATL) offer, allowing for a reassessment of their tax liabilities.

offer in compromise form

What are your options if IRS dismisses your OIC?

If the IRS rejects your offer in compromise, they'll be more informed about your finances, including your income sources, bank account locations, and assets.

Should your OIC get turned down and the IRS decides to pursue a levy, they'll know precisely where to target.

Crafting a well-thought-out and professionally prepared offer in compromise can significantly improve your chances of settling your tax debt for less.

Understanding the Offer in Compromise Program

An offer in compromise (OIC) is an agreement outside of court between a taxpayer and the IRS. It aims to settle the taxpayer's debt and temporarily stops collection actions.

Remember, the IRS can agree to accept less than the full amount owed if the taxpayer presents valid reasons.

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