What is an IRS Offer In Compromise?

The Offer-in-Compromise can be a life-saving form of tax resolution for those who truly need it. On average people who settle their debt using an Offer-in-Compromise end up paying less than 20% of the actual amount they owed to the IRS.

Approved by Congress to aid taxpayers, an Offer in Compromise (OIC) can be the ideal solution for resolving your tax problem as it can result in significant savings.

In some cases, your financial situation may make it nearly impossible for you to pay off all your tax debt, even when utilizing tax resolution over the long term via an installment plan. In such situations the IRS may be willing to accept an “Offer-in-Compromise” and significantly lower your tax bill.

Here is how an IRS Offer-in-Compromise works:

  • Both you and the IRS acknowledge that there is no feasible way to pay off all your tax debt. This means that you do not have enough income to pay off your debt and do not have enough valuable assets that the IRS could seize
  • You offer to pay the IRS the maximum amount that you can afford even though that amount may fall far short of the actual tax debt
  • If the IRS accepts that the amount you offer to pay is the most that it could reasonably expect to collect from you, it will agree to compromise and essentially lower your tax debt to match the amount you can pay
  • Once you have finished paying the agreed upon amount, the tax debt is considered “paid in full.” This is true even if the agreed-upon Offer-in-Compromise is only a small percentage of what you originally owed

Getting Help with Offer In Compromise

The acceptance rate on OIC’s is fairly low due to errors or omissions on submissions. In order to have a better chance of approval, one should utilize professional assistance for this complex process. Our highly qualified, trained and experienced staff will work very hard to see if this is the best solution for your IRS tax debt. 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.

Regardless of the reason, to be eligible for an Offer in Compromise the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

For the best chances in successfully negotiating an offer in compromise, you’ll want a professional on your side. We are highly experienced in preparing, submitting and settling these cases. By calling one of our Tax Consultants we will answer any questions you may have and provide you with a better assessment of your options.