Settle for Less
What is an Offer in Compromise?
Settle for less than the amount owed.
In 1992 the IRS added an option to the tax code called an Offer in Compromise (OIC). An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax portion for less than the amount owed. There are three types of OIC. Doubt as to collectability, doubt to liability and Effective tax administration.
When an Offer in Compromise is accepted, it can be a godsend. However, it is not a solution that works for everyone. To qualify, you must be able to show the IRS you can’t, or shouldn’t be required to pay the debt. For IRS Offer in Compromise tips, get the experts at Tax Relief Advisers on your side.
The simple answer is no. An Offer in Comprise may not be the best option. Filing an OIC is technical. Doing it wrong, or unknowingly thinking you are eligible can cost you time and money, not to mention the psychological toll of dealing with a problem that will not go away.
Collection Statute Expiration Date (CSED). This is the statute of limitations on your debt. The IRS has ten years from the time of assessment of the tax delinquency to collect, and an OIC tolls the statute of limitations. Depending on where you are in relation to your CSED date, an OIC might cause a harmful delay.
Bankruptcy in some cases may be a better option. However, you need to understand what can be discharged. It is the three-two rule which pertains to when the tax was assessed, and when were the returns filed. All tax returns must be filed before you can claim bankruptcy.
A partial Payment Plan or Non-Collectible status can often be better options than OIC. With a small payment or no payment at all, you can ‘run’ the statute of limitation without an OIC.
No. The Fresh Start Program amended several different IRS programs, including OIC. But the Fresh Start Program is not a resolution in and of itself. Its function was to make tax dues relief easier.
Some of the things the Fresh Start Program did:
Extend the installment repayment plan from 60 months to 72 months.
Provided for a streamline payment plan that requires limited financial documentation.
Raised the amount owed to qualify for a streamline payment plan from $25,000 to $50,000
Allows for penalty abatement in some cases.
Made the OIC process easier.
It is estimated that taxpayer submitted offers are accepted 14% of the time. This number goes up dramatically if done by an experienced firm. If your case is simple and you understand the process and forms, take a shot. You can find all the forms under IRS.gov Take note that an OIC may not be your best option.
If you want to go it alone here are some documents to get you started. Form 656 booklet that goes into detail about the OIC process https://www.irs.gov/pub/irs-pdf/f656b.pdf. Form 433-OIC financial document you will need in conjunction with the 656. https://www.irs.gov/pub/irs-pdf/f433a.pdf. Form 433B-OIC for business https://www.irs.gov/pub/irs-pdf/f433b.pdf.