Unpaid income taxes can create a nightmare scenario when a taxpayer's tax liability spirals out of control. It can ruin your finances, both personal and business related, and it is astonishing how quickly a small amount of unpaid taxes can snowball into crushing debt.

Fortunately, when you are no longer able to afford your income tax obligations, the IRS does offer potential options to help you reach a settlement, at least when they consider settling to be a win-win situation for both you and the government. Despite their very deserved reputation, the IRS is much more willing to negotiate than most people realize.

One of the most useful tools the IRS offers to help you settle income tax debt is known as the Offer in Compromise (OIC) program.

In this blog, Flat Fee Tax Service, Inc. will detail for you some of the most important things taxpayers should know about the Offer in Compromise (OIC) program and how it works. As always, this blog is not intended as legal advice for your specific situation. If you  are struggling with IRS income tax issues, please contact our IRS tax relief professionals and let us analyze your unique circumstances, advise you on the best course of action, and negotiate with the IRS on your behalf.

What is the Offer in Compromise (OIC) program?

The Offer in Compromise is a form of income tax debt settlement, allowing you to pay the IRS less than what you originally owed on your taxes. It is meant to serve as tax relief for taxpayers who cannot afford their tax bill, while also allowing the IRS to collect as much of the tax debt as they can without having to resort to more costly collection efforts.

Who qualifies for an Offer in Compromise?

In order for the IRS to accept an Offer in Compromise settlement, one of three conditions must be fulfilled. The first is if there is reasonable and demonstrable doubt as to the legitimacy or accuracy of the tax liability. You cannot file for an Offer in Compromise (OIC) based solely on this condition if you have had other opportunities to dispute the tax liability but did not take action. 

Secondly, an Offer in Compromise (OIC) may be accepted if there is doubt as to the collectibility of the debt, meaning the debtor can prove that the IRS would not be able to actually collect the owed debt (such as if the debtor has no assets, etc). This is the most likely reason to be approved to settle with the IRS for less.

Finally, an IRS settlement (OIC) may be accepted based on “Effective Tax Administration,” which means that neither side disputes the income tax liability or the collectibility of the full debt, but it is clear that collecting the full debt would cause the taxpayer undue hardship. An Offer in Compromise (OIC) is often times requested on the grounds of effective tax administration when the taxpayer is elderly or has a disability.

What does the IRS consider?

Under all circumstances the IRS will analyze the debtor’s income, expenses, asset equity, and ability to pay when determining whether or not to accept an OIC settlement.

Submitting an Offer in Compromise.

If you are a qualifying taxpayer who is interested in receiving an IRS settlement on your income tax debt, you must submit the proper forms to request the settlement from the IRS. The attorneys at Flat Fee Tax Service, Inc. will help you understand what forms you must submit and present them in the best possible light so as to maximize your chances of having your offer accepted. You will need to include a $186 application fee and your initial payment from your requested OIC payment plan (unless you meet specific low income certification guidelines). Depending on the IRS settlement you are requesting, this could be a lump-sum payment of 20% of the total IRS settlement amount offered, or a periodic payment where you submit the initial installment of a proposed payment plan and you continue to adhere to that plan while the IRS considers the offer and after if it is accepted.

What happens when the IRS accepts/rejects your Offer in Compromise?

If your Offer in Compromise is accepted, you will adhere to the settlement plan that you proposed. If it is rejected, you have the opportunity to appeal within 30 days, otherwise the IRS will continue to pursue the collection of the full amount of your outstanding tax debt.

The Offer in Compromise can be a lifeline when you are unable to fulfill your tax obligations. If you are facing IRS income tax issues, please contact the able IRS tax relief team at Flat Fee Tax Service, Inc. to learn about your options with regard to achieving a debt settlement, and to decide on your best course of action for overcoming your debt.




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