The offer in compromise (OIC) program is offered by the IRS. An offer in compromise allows individuals to settle their tax debts for less than the full amount they owe.
The IRS evaluates several factors, including a person’s ability to pay, income, expenses, and asset equity, to determine whether to approve an offer in compromise. To be eligible for an offer in compromise, individuals must have filed all required tax returns, made all required estimated tax payments, not be involved in an open bankruptcy proceeding, have a valid extension for the current year’s tax return, and have made tax deposits as an employer for the current and past two quarters.
If the IRS cannot process an offer in compromise application, they will return the application and any fees paid, applying any offer payments to the outstanding tax balance. Payment options for approved offers in compromise include a lump sum cash payment of 20% of the total offer amount, followed by the remaining balance paid in five or fewer payments, or periodic monthly installment payments.
Individuals who meet low-income certification guidelines are exempt from paying the application fee, initial payment, or monthly installments during the IRS’s review of the offer. If an offer in compromise is rejected, individuals have the option to appeal the decision within 30 days using the Request for Appeal of Offer in Compromise (Form 13711). The IRS Independent Office of Appeals provides additional assistance in the appeals process.
It is important to note that the offer in compromise process can be complex, and having the guidance of a tax attorney at Anderson Bradshaw can greatly assist in navigating the requirements and increasing the chances of a successful outcome.