What Is An Offer In Compromise?

tax relief through offer in compromise

What is an Offer in Compromise? 

One option for taxpayers seeking tax relief is the Offer in Compromise, or “OIC”. This is one of the most common solutions for them to settle their tax liabilities. The offer in compromise is an agreement between the taxpayer and the Internal Revenue Service to accept a lump sum payment that is less than the full amount owed in order to settle the tax liabilities.

The offer in compromise is considered the best tax relief option for the taxpayer who wants to settle his or her tax liabilities in as fast and effective way as possible. However, there are important considerations before the IRS will accept the offer in compromise of the taxpayer. This is based on the following factors:

  • The IRS will accept the offer in compromise if there is evidence of doubt as to liability. Instead of battling it out with the taxpayer or the taxpayer’s representative (such as us) as to the rightfulness of the tax liability, the IRS may choose to accept an offer in compromise.
  • The IRS will accept an offer in compromise if the amount that the taxpayer owes is not collectible. If the taxpayer’s assets and liabilities are far less than the total amount of the tax debt the IRS knows it probably cannot collect the entire amount, and may choose to accept an offer in compromise.
  • Some tax debts are dischargeable in bankruptcy. The IRS may choose to accept the offer in compromise rather than try to collect through the bankruptcy Trustee; if it will be able to collect anything at all.
  • If there is a likely change in the taxpayer’s circumstances impending; such as the loss of a job or the onset of large medical bills. Even though the taxpayer is not currently under financial hardship, the coming expenses are so massive it would be unfair for the taxpayer to pay the full amount of taxes due.

The above options mostly require different forms, different supporting documents, and different arguments made to the IRS agent. Filing the wrong forms and documents with the IRS may cause delay or denial of the offer in compromise.

As an option for tax relief, the offer in compromise should be taken into serious consideration. You should also consider hiring a professional to file the forms, documents and talk to the IRS on your behalf.