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.
The first step in settling any tax liability is to determine your financial situation and assess the ability to pay.
You do not need a tax attorney to file an IRS offer.
By reviewing all of the options in relation to their individual situations, an experienced tax professional will help taxpayers avoid pitfalls, set up the best collection option with the IRS, and eventually save them a lot of grief and money.
Forms used are Form 433-A OIC, 433-B OIC, and 656. The IRS also has a compromise pre qualifier.
If you do not have a economic hardship, installment payments may have to be set up to settle the taxes owed.
An IRS OIC is a proposal for paying tax debt based on the amount calculated as the reasonable collection potential or RCP. The offer cannot be unfair and inequitable to either party.
A settlement allows you to settle your tax debt for less than the full amount you owe.
It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship.
The IRS considers your unique set of facts and circumstances:
- Ability To Pay
- Monthly Income
- Basic Living Expenses
- Asset Equity
The IRS generally approves an offer when the amount offered represents the most we can expect to collect within a reasonable period of time.
How to File an IRS Offer In Compromise
The IRS Offer package is a long and comprehensive plan.
This involves disclosing to the IRS every aspect of your finances. Therefore, it is best to make sure you are a successful choice before applying for the program.
An unsuccessful OIC will only expand the statutes of your debt collections.
It also gives the IRS any bit of information they need to implement against your collections.
If your OIC is rejected by the IRS, they now know more about your financial situation; including where your money comes from, where your bank accounts are, and what you own.
If your OIC is refused and the IRS wants to levy you, they know exactly where to go.
Estimated Time to Complete 360 minutes
Application Fee USD 205
What are Things Needed ?
Recommended tools to file Form 433 A OIC and Form 656 :
Steps to Submit an Offer to the IRS
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.
You'll find step-by-step instructions and all the forms for submitting an offer in the Booklet, Form 656-B . 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.
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.
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
- 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.
- You may request for appeal if rejected, within 30 days using Request for Appeal of Offer in Compromise, Form 13711 .
- The IRS Independent Office of Appeals provides additional assistance on appealing your rejected offer.
TheCPATaxProblemSolver has the skills and experience to determine whether the Offer In Compromise program is for you.
Retaining our tax professionals guarantees you peace of mind.
You can rest assured:
- Settle your tax bill for LESS than the IRS claims you owe! We know all updated OIC administrative procedures and tax laws.
- We have considerable weapons including Special Circumstance Cases and Appeals.
- We know that a prepared and calculated approach is the only way to maintain our excellent track record of consistent OIC acceptance.
- If you qualify for the OIC program, you can save thousands of dollars in taxes, penalties, and interest. Taxpayers can negotiate settlements on all types of taxes including most payroll taxes, penalties, and interest.
- The OIC program provides taxpayers who owe the IRS more than they could ever afford to pay, the opportunity to pay a smaller amount as full and final payment.
- A Doubt as to Collectibility (DATC) Offer is negotiated on the basis of a taxpayer’s inability to pay and takes into account the taxpayer’s current financial position including the taxpayer’s equity in assets.
- The OIC program also allows taxpayers that do not agree that they owe the tax or feel that the tax has been incorrectly calculated, an opportunity to file a Doubt as to Liability (DATL) offer and have their tax liabilities reconsidered.
What are your options if IRS dismisses your OIC?
If the IRS refuses your OFFER IN COMPROMISE, they now know more about your financial situation; namely where your money comes from, where your bank accounts are, and what you own.
If your OIC is refused and the IRS wants to levy you, they know exactly where to go. Offer In Compromise, a carefully and professionally curated offer will give you the best chance to settle for dollar pennies!
UNDERSTANDING THE OFFER IN COMPROMISE PROGRAM
An OIC is a type of out-of-court agreement between a taxpayer and the IRS.
OICs are designed to negotiate a resolution to the taxpayer’s liability and place collection efforts on hold.
Do keep in mind that the IRS has the power to compromise or settle federal tax liabilities by accepting less than full payment, provided the taxpayer can provide valid reasons.