Get Offer in Compromise Help Now!
Americans are surely familiar with the “pennies on the dollar” commercials on TV, referring to the Offer in Compromise program. An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS, allowing a taxpayer to settle their tax debt for a small part of the overall amount. This amount will either be paid in a lump sum, or split into five payments. Furthermore, under this agreement, a taxpayer is not allowed to owe the IRS at anytime within a 5-year compliance contract.
Offer in Compromise Facts
The hard truth about an Offer in Compromise is just that; hard. The real picture is that most taxpayers do not qualify for this program. The IRS accepts between 15-25 percent of Offer in Compromise applications every year, and with nearly 10 million Americans having some type of tax debt with the IRS, that could mean quite a lot of rejections.
The IRS has a formula to determine which taxpayers qualify for the Offer in Compromise. The formula looks at many factors of a taxpayer’s situation, including:
- Doubt as to Collectability: The IRS determines that it is unlikely that a taxpayer will satisfy their tax debt before the Statute of Limitations expires.
- Doubt as to Liability: A taxpayer provides documented proof that the assessed tax debt is incorrect or unjust.
- Effective Tax Administration: A taxpayer proves that settling their tax debt in full, either with a lump sum or monthly payment plan, would cause them financial hardship.
In February 2011, the IRS announced updates to the Offer in Compromise program in order for more taxpayers to be eligible, including:
- Taxpayers with an annual income of $100,000 or less can apply.
- Tax debt amounts of $50,000 or less are eligible.
To submit an Offer in Compromise a taxpayer should use Form 656, and include 20 percent of their settlement offer with the application. This nonrefundable payment will be put towards the tax debt if the application is denied. Call today for a free tax debt consultation before you apply for an OIC to ensure you qualify! We can help to keep you on the right track.
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