Offer In Compromise – OIC: Resolving Complex Tax Issues
The IRS Offer in Compromise program provides taxpayers that owe the IRS more than they could ever afford, a chance to pay a small amount as a full and final settlement. This program also offers taxpayers that don’t agree that they actually owe the taxes in the first place, a chance to file an Offer in Compromise and have those tax liabilities reconsidered.
What is an Offer in Compromise?
An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax debt. The IRS has the authority to settle, or “compromise,” federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons:
- Doubt as to liability – Doubt exists that the assessed tax is correct.
- Doubt as to collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax owed.
- Effective Tax Administration – There is no doubt the tax is correct and could be collected but an exceptional circumstance exists that allows the IRS to consider a taxpayer’s OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.
The Offer in Compromise program allows taxpayers to get a fresh start. All back tax liabilities are settled with the amount of the offer. All federal tax liens are released upon IRS acceptance of an Offer in Compromise and payment of the amount offered. An offer filed based on the taxpayers inability to pay the IRS looks at the taxpayer’s current financial position and considers their ability to pay as well as their equity in assets. Based on these factors, an Offer amount is determined.
Taxpayers can compromise all types of IRS taxes, penalties and interest. Even payroll taxes can be compromised. The IRS accepts approximately 50% of all Offers filed with the average amount accepted is 14 cents on every dollar owed. If you qualify for this program you can save thousands of dollars in taxes, penalties and interest.
How to Get Your Offer Accepted
If you are unable to pay off your tax debt in full, one payment, then you should take advantage of the IRS Fresh Start Initiative program. Since 2008, the IRS has offered alternative methods to paying off tax debt for individuals along with business owners. One of the methods under the program is called the Offer in Compromise.
Do I Need Professional Assistance?
It depends on your situation, but generally speaking having a reputable tax representation firm by your side offers strong benefits. They will have the knowledge and experience in working with the IRS while protecting your rights under the law. This means that they can take the information you provide, compare that with what the IRS uses to evaluate your compromise proposal, and let you know if it’s the best course of action.
Our specialized knowledge and years of experience will benefit you greatly when creating a compromise that the IRS would accept. Plus, you will get the right advice, so you can make the best-informed decision about what action to take in solving your back tax debt.
Even though our tax firm is located in Las Vegas, Nevada, we actually represent taxpayers in all 50 states.