What is an Offer in Compromise? An Offer in Compromise (OIC) is an agreement between the taxpayer and the government that settles a tax liability for payment of less than the full amount owed.
The Internal Revenue Service will generally accept an Offer in Compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential.
An OIC is a legitimate alternative to declaring a case currently not collectible or to a long-drawn-out payment plan.
The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the government.
The success of an Offer in Compromise is more likely when a taxpayer makes a reasonable proposal consistent with their ability to pay.
It also hinges on the ability of the Internal Revenue Service to make a timely and reasonable decision.
When filing an OIC a taxpayer is expected to provide fairly good documentation to prove their ability to pay or lack thereof.
The ultimate goal is a compromise which is in the best interest of both the taxpayer and the government.
However, the Offer in Compromise is not for everyone and many requirements must be met before the Internal Revenue Service will accept an OIC as settlement on a tax debt.
So beware of companies on TV promising you can settle your tax debt for less.
Filing an OIC when you don't meet all the requirements can often times do more harm than good because the statute of limitations the government has on collecting your tax debt is extended by the period your OIC is pending plus 90 days.
It is not uncommon for an OIC to be pending for nine months or more.
Additionally, the waiting periods for other alternatives to settling your tax debt - alternatives that are just as good or better than an OIC - are extended while your Offer in Compromise is pending.
Do you qualify and meet the requirements for an Offer in Compromise to be accepted if you decide to file one? This is not an easy question to answer without detailed knowledge of a taxpayer's situation.
As a taxpayer with an IRS problem you should guard against firms that promise to file an OIC for every client that calls their toll-free number or walks through their doors.
Those firms can't back up that promise without having the details of your situation.
Even firms that promise to do an up-front analysis at no charge can't do an effective job of analyzing your situation.
There are often details of a taxpayer's situation buried underneath the surface that require thorough review before a determination is made as to whether or not the taxpayer is an OIC candidate.
This type of thorough work takes time and no reputable professional gives that kind of time away free of charge.
Save yourself unnecessary frustration and hire a reputable professional to help you get the job done right.