What is an Offer in Compromise?

An Offer in Compromise, or OIC, is an agreement that may allow a qualifying taxpayer to resolve an IRS tax liability for less than the full amount owed. It is not available to everyone, and the IRS evaluates each application based on the taxpayer’s individual financial circumstances.

How do I know if I qualify for an Offer in Compromise?

Qualification depends on more than simply how much tax you owe. The IRS considers factors such as your ability to pay, income, necessary living expenses, and the equity in your assets. Generally, taxpayers who can fully pay their liability through an installment agreement or other means will not qualify for an Offer in Compromise based on inability to pay.

Do I have to file all of my missing tax returns before applying?

Yes. To be eligible to apply, you generally must have filed all tax returns you are legally required to file and be current with required estimated tax payments. Business owners with employees must also be current with required federal tax deposits for the current quarter and the two preceding quarters.

Offers in Compromise

Explore Your Options for Settling IRS Tax Debt

DON’T WAIT TO FILE

Address Missing Tax Returns Before the IRS Does

People who do not file their returns usually fail to do so due to some traumatic occurrence in their lives. For these people, a deal can usually be made within the collection division of the IRS. However, the IRS can treat failure to file as a criminal act. Before any deal can be made with the IRS, at least the past six years returns must be filed. If you fail to file a return(s), eventually, the IRS will file a return on your behalf based upon what has been reported under your Social Security number/Federal ID number. In these cases, the IRS will not consider itemized deductions such as mortgage interest, state income and property taxes paid, charity contributions, or medical deductions.

Additionally, the IRS will not consider a change in your personal exemptions (ie child moving off to college or the birth of a child). Basically, the IRS will give you the standard deduction with the minimum personal exemptions in order to maximize your tax liability. The Substitute for Returns (SFRs) can be replaced if a replacement return is filed timely with a letter explaining why the return is late. However, if you let the SFR remain on your record for an extended period of time, the more difficult it will be to replace the return with a correct return.

In short, don’t wait; correct the return(s) as soon as possible.

Discuss Your Tax Situation

Frequently asked questions

OFFERS IN COMPROMISE

Your Tax Debt Doesn’t Have to Define What Comes Next.

If you’re struggling with IRS tax debt, there may be options for moving forward. Expert Tax Solutions can review your financial situation, help determine which resolution strategies may be available, and guide you toward an appropriate path for addressing what you owe.

Explore Your Tax Resolution Options