OIC - Offer In Compromise:

IRS Debt Settlement

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

Important Update: IRS Announces Suspension of Offer in Compromise Payments Until July 15

The IRS launched the People First Initiative because of the COVID-19 crisis. While payments and default are suspended until July 15, interest on the unpaid balance will still accrue.

If you are late in filing your 2018 tax return for 2018, you also have to file it until July 15, to avoid default on an current settlement deal.

If you do not have one configured yet, the IRS still accepts new OIC applications.

IRS 2020 People First Initiative Covid-19

The Offer in Compromise also known as an OIC

infographic on calculate Offer in compromise

An IRS Offer in Compromise (OIC) is a proposal for paying tax debt. This requires taxpayers to agree to settle a tax debt with IRS for less than they owe. Because the IRS is always looking to recover as much of the tax debt as possible, only a fraction of OICs are approved every year.

TheCPATaxProblemSolver has the skills and experience to determine whether an Offer in Compromise is the program 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 Offer in Compromise 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 a full and final payment.
  • A Doubt as to Collectability (DATC) Offer in Compromise 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 an Offer in Compromise-Doubt as to Liability (DATL) and have their tax liabilities reconsidered.

 

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The Offer in Compromise 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 statues on your debt collections. And it gives the IRS any bit of information they need to implement against you 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.

Offer in Compromise Requires

When applying for Offer in Compromise with the IRS, there are many issues to consider. First, the IRS wants all of the tax returns to be legal. Your annual tax payments must also be valid. That means you will file your last six annual income tax returns.

  • If you are a wage earner, you must be withholding enough tax from your paychecks to result in a tax return with no balances due.
  • If you're self-employed, your projected tax payments have to be valid. Those are quarterly due.

Keep in mind that one mistake may result in your OFFER IN COMPROMISE being returned with no right of appeal.

Another incredibly important aspect is to recognize that you need to remain completely compliant for the next five years if your Offer in Compromise is accepted. People who get accepted often lose their settlement by failing to file on time future tax returns or by filing a return with a due new balance. If the offer fails, all tax liabilities return with additional penalties and interest. Besides, none of the money paid to settle is refundable. Before applying for the offer it is important to have a plan to remain compliant.

OIC- Types of Services

There are also various types of Offer in Compromise programs prior to filing your application. The most popular OFFER IN COMPROMISE is a "Collectability Doubt" order. In short, this means that the settlement that you are proposing is for the largest sum of money that the IRS might reasonably expect to collect from you over the life of the debt, typically ten years. The IRS takes into account your present net income, your asset collateral, and your expected future earnings. So they make a decision to embrace this kind of OIC.

The other programs which are less common are Doubts About Liability and Effective Tax Administration. If you apply for one of these programs, you request that the IRS ignore your financial conditions. Instead, you want them to take extraordinary circumstances into account to rule on settling your debt. In such cases, the IRS considers reasons why you may not owe the debt or why your debt should be settled otherwise, for health reasons , for example.

Understanding Full Financial Disclosure in the OIC

You are expected to submit a full financial statement when making an Offer in Compromise. That means you have to tell the IRS TODAY about your financial situation. The IRS analyses your revenue, expenditure , assets and any resources you need to decide how much realistically they would expect to get. When considering which expenses are allowed the IRS follows strict standards. So it is very important to consider all your choices before you agree to pursue an OFFER IN COMPROMISE.
Make sure you can afford to pay the discounted fee before sending an IRS Offer in Compromise. You have two options for repayment with an OFFER IN COMPROMISE-lump sum and periodic payment. After five months of approval, the IRS requires you to be able to pay off a lump sum Offer in Compromise and a Time Payment Plan is split into 24 equivalent monthly installments beginning when you submit the OIC application.
Holding these payments OFFER IN COMPROMISE is key to OIC 's success. Defaulting on an arrangement would invalidate the whole OIC, ensuring that you will be responsible for the initial amount of tax liability plus fines and interest again. This also makes it difficult to apply again for a tax debt settlement program, as the IRS would require a clear reason for the default. It is very important to be fully aware of what you do when you submit an Offer in Compromise.

Submitting an Offer in Compromise

To make an Offer in Compromise needs comprehensive paperwork to be done, including full financial disclosure, which can be both cumbersome and time consuming for many. It is best to consult a tax advisor while considering an Offer in Compromise. A licensed tax professional will advise you on the probability that your offer will be accepted and discuss the terms and conditions of the agreement, depending on your particular situation. Note, only if the IRS decides that the reduced sum is the best they would expect to get unless you have exceptional circumstances, can the tax debt decrease. Of example a major benefit is hiring a tax lawyer to bargain with the IRS.

Professional tax debt reduction assistance will help you discover all the choices available for having the most tax debt reduction. Given that tax debt management involves negotiation with the IRS, knowledge of tax law and the applicable tax code is essential. It is wise to use expert help to reach a smooth and beneficial resolution for tax debt reduction, particularly of a large amount of tax debt.

What 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  AN OFFER IN COMPROMISE

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.

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