Offer In Compromise
An Offer In Compromise (OIC) is a payment plan offered by the IRS, and many state tax authorities, which allows you to settle your tax debt for less than your full balance due. The IRS considers many factors before accepting an OIC and, generally, the process can take 6 to 12 months to complete.
If your offer is accepted, you must be prepared to adhere to several stipulations, including 100% tax compliance for at least five years. Otherwise, your settlement can be reversed and the full amount of your previous tax balance will become due.
FACTS VS. FICTION
Whether it was a radio ad, TV commercial or letter in the mail, we are sure that by now you have heard how you can settle your tax debt for a “fraction” of what you owe, oftentimes referred to as “pennies on the dollar.” Don’t believe the hype!
Although the IRS’s Fresh Start Initiative makes it possible for more people to qualify and get approved for Offer In Compromise relief, it is still a fact that most taxpayers don’t meet the qualifications to settle their tax debt. When this is the case, it’s important to know that there are other beneficial tax debt relief options available, like a financial hardship status or a streamlined installment agreement.
Comprehensive Financial Evaluation:
Unlike other creditors, the IRS completes a thorough investigation into your income, expenses and assets to determine your ability to repay your tax debt. They can require the liquidation of your assets, like retirement plans, to pay your tax debt or to negotiate a better settlement on behalf of the government.
Cost of an Offer In Compromise:
Unless your income is at poverty level, you will be required to pay an application fee and make an initial payment towards your settlement agreement, when submitting the offer packet. To qualify for the lump sum offer payment, you’ll have to make an initial payment to the IRS of 20% of your total offer amount, along with the application fee. So, if you plan to offer $50,000 to settle your tax debt, your initial payment would be $10,000 – make sure you have access to it before submitting the offer.
IRS Collection Expiration Date:
Generally, the IRS has up to 10 years to collect back taxes from you. However, once you submit a request for an OIC, this count down is suspended (or put on hold). If your offer is rejected, returned or withdrawn, the IRS will add more time to your original collection expiration date.
Therefore, the choice to request an Offer In Compromise should be done very carefully and with an experienced professional.
We believe Offer In Compromises are wonderful for those who qualify. However, before suggesting that our clients take the OIC route, we complete a thorough investigation to determine if an OIC is a sensible resolution. Requesting an Offer In Compromises can be a more costly, time demanding service. Therefore, we provide our clients with strategies and advice to make the right decisions and avoid costly mistakes.
Over the years, we have successfully won tax settlements for our clients. However, we are very clear that this success is largely based on our tax law expertise and client communication strategy, which is led by honesty, integrity and pure facts.