An Offer in Compromise (OIC) is an agreement between you and the IRS to settle your tax debt for less than the full amount owed. If the IRS approves an OIC and you comply with the terms, you will satisfy all of your outstanding IRS liabilities in full.
OICs fall into three categories:
1. Doubt as to Collectability
Most OICs are submitted based on Doubt as to Collectability. The IRS will accept such an Offer if it determines that your Reasonable Collection Potential (RCP) is insufficient to pay the liabilities in full, based on your income and the value of your assets. The IRS will not consider an OIC if you have delinquent tax returns, so it is important to make sure that you comply with all filing requirements before submitting an OIC. If the IRS accepts your OIC and you make all of the required payments, the IRS will write-off your remaining balances and release any Federal Tax Liens that have been filed against you.
2. Doubt as to Liability
If a legitimate argument can be made as to whether or not you owe the liabilities in question, you can submit an OIC based on Doubt as to Liability. With this type of OIC, you are arguing that it is in the best interest of the IRS to settle for less than the full amount it claims you owe, rather than go to court. When an OIC is submitted based on Doubt as to Liability, you are not required to pay the debt until after the IRS approves the OIC.
3. Exceptional Circumstances
Even if you are not eligible for an OIC under either of the two criteria listed above, the IRS may still be willing to accept an OIC if you can prove exceptional circumstances, such as paying in full would render you unable to meet your basic living expenses. Keep in mind that these types of OICs are very rare.
An Offer in Compromise is a great tool to resolve your outstanding liabilities and get a clean slate. However, you must calculate and submit the offer properly and carefully. If not done accurately, the IRS will not only reject the OIC but will keep the down payment you submit as part of the process.
If you owe money to the IRS, contact Goldin Peiser & Peiser to discuss your case with one of the experienced professionals in our IRS Representation and Defense Services department. For more information about Offers in Compromise or our other IRS services, please call 214-635-2498 or contact Sidney Goldin, CPA, Rick Lahr, CPA, or Naveid Jahansouz, Esq. by filling out the form below.