The Offer in Compromise (OIC) program is an IRS program that allows individuals with unpaid tax debt liabilities to negotiate a settlement amount that is less than what is owed to clear the IRS tax debt. This powerful program can provide significant savings for taxpayers who qualify.
A person who owes money but can't afford the full amount due to financial hardship may be able to offer the IRS a lower, more affordable settlement. This offer could include a lump-sum payment or a series over several months. The IRS offers a forgiveness program for any remaining debt if it accepts the OIC, which contrasts with traditional IRS payment plans.
The OIC program is only available to taxpayers who have:
To be eligible for an OIC settlement, a taxpayer must meet at least one of the following conditions:
The debtor can prove that the tax liability has been incorrectly assessed
The debtor can demonstrate that the debt is unlikely to be collected in full by IRS under any circumstances
The debtor cannot contest the liability or collectability but can show extenuating circumstances that would make it impossible to collect the debt
The IRS requires that you submit a formal offer using IRS Form 656, Offer In Compromise. There is a $186 fee for filing an OIC, though you might be exempted if your monthly income falls below poverty guidelines.
You must submit detailed financial information via:
To calculate your minimum offer amount, the IRS wants to know your collection potential based on your financial disclosures. Your offer must equal:
Settlement Amount =
Monthly disposable income × number of months + net realizable equity in assets
Examples:
Example 1: Monthly income $5,000, expenses $4,500 = $500 disposable × 12 = $6,000 minimum offer
Example 2: Monthly income $4,250, expenses $4,500 = $0 disposable income
Payments made in five or fewer installments within 5 months of acceptance
Must include 20% of offer amount plus $186 application fee when submitting
Monthly payments for less than 24 months but more than 5 months
Must send first monthly payment plus application fee when applying
Obtain all records, transcripts, and supporting documents going back 10 years to construct the most advantageous resolution program
Various types of installment agreements available based on income, liability amount, and terms
For individuals experiencing extreme economic hardship - suspends all payments and collection efforts for 2 years
Motion for penalty reduction that could reduce penalties and fees by up to 40%
Immediate garnishment and levy holds to negotiate successful resolution - withheld funds can be returned within 72 hours
Preparing a package that gives the IRS every chance to accept your offer in compromise is key to success. The average taxpayer doesn't know everything about the IRS or how they work. Having experienced tax professionals like Ideal Tax representing you significantly increases your chances of approval.
Don't navigate the complex OIC process alone. Our experienced team at Ideal Tax has helped thousands of clients successfully negotiate offers in compromise and resolve their tax problems. We can evaluate your situation, prepare your application properly, and represent you throughout the entire process.
An Offer in Compromise can potentially save you thousands of dollars and provide a fresh start. Our experts will determine if you qualify and guide you through every step of the process to maximize your chances of IRS acceptance.
Check Your OIC Eligibility Today