What an Offer In Compromise with the IRS Means for You

May 27, 2019

Millions of Americans face billions of dollars of delinquent debt to the IRS. It can make opening the mail or answering your phone a stressful experience. Luckily, you can negotiate with the IRS with the help of a tax resolution professional. One such tax resolution method is an offer in compromise. Keep reading this comprehensive guide to learn what an offer in compromise with IRS means for you.

What Is an Offer in Compromise with IRS?

An offer in compromise with IRS is a common tax resolution solution that allows delinquent taxpayers to pay less than their total liability. It is usually only accepted if the taxpayer cannot afford to pay the entire amount owed after selling assets and property and considering his or her current income and future potential earnings.

Why Is an Offer in Compromise Offered?

There are several reasons why the IRS accepts an offer in compromise, or OIC, proposal. This may be because there is a reasonable doubt of liability. This criterium is met if there is a legitimate dispute regarding the amount or existence of the correct tax debt according to the law.

Second, an OIC may be accepted if there is doubt that the entire amount owed is collectible. If the taxpayer’s income and assets are less than the entire tax liability, then there may be doubt regarding the collectibility of the tax debt.

Finally, the IRS may accept an offer in compromise on the basis of effective tax administration. In other words, there may be no doubt the tax is legally owed, and it is fully collectible. However, there are exceptional circumstances causing the delinquent debt collection to be inequitable and unfair, or full payment will cause an economic hardship. 

Do I Qualify?

The Internal Revenue Service looks at many factors to determine if a particular taxpayer qualifies for an offer in compromise. Such factors include if you have filed all tax returns, made all necessary estimated tax payments for the current year, and if you have made all mandatory federal tax deposits for the current quarter if you are a business owner with employees.

Pre-Qualifier Questionnaire

You can see if you will probably qualify with an offer in compromise with IRS, you can take the Offer in Compromise Pre-Qualifier questionnaire. Questions include if you are currently in a bankruptcy proceeding, if you have filled out all mandatory tax returns, and then it will ask some questions about your particular circumstances.

Reasonable Collection Potential

The reasonable collection potential is the measurement of a taxpayer’s ability to pay his or her tax liability. This includes the realizable value from assets such as real property, bank accounts, automobiles, and other property. The IRS also looks at future income less anticipated basic living expenses. In most cases, you will not be approved for an OIC if the amount you offer is less than the reasonable collection potential.

Alternatives to an Offer in Compromise

If you are not eligible for an offer in compromise, you may qualify for an installment plan to pay your delinquent tax debt in full. The IRS will look at your assets, incomes, and expenses to determine a monthly payment that you can afford until you become current on your liability. To apply for an installment plan, you can file the Installment Agreement Request, For 9465, or you can use the online payment agreement tool.

Schedule Your Initial Consultation Today

For help successfully navigating an offer in compromise with IRS, or for more information, contact us today to schedule your initial consultation. With over 35 years of experience, our concerned, compassionate tax specialists will listen to your case with care and confidentiality. Rest assured, we have the qualifications, education, and track record to offer you the best tax resolution solution for your unique situation.