One of the most controversial and confusing resolutions regarding U.S. tax which is hard to meet the qualification criteria, is the IRS Offer in Compromise (OIC). An Offer in Compromise (OIC) is an agreement between the IRS and the taxpayer to settle the taxpayer’s tax liabilities for less than the total amount owed. 

Yet, millions of businesses and individual taxpayers still owe the IRS, with only a few getting the Offer in Compromise.

The IRS has strict and specific guidelines for accepting or rejecting your Offer in Compromise. Issues of taxation, even in the non-pandemic year, have always been complicated for many tax filers. That’s why you need to clearly understand these guidelines and what the IRS considers to be in its best interest to ensure your offer has a chance of getting accepted.

Successful acceptance of your Offer in Compromise through IdealTax can reduce their amount by up to 90%, giving you a considerable debt reprieve. But when proper guidelines are followed, an Offer in Compromise (OIC) reduces your liability to a small fraction of the original amount. Here we share our expert’s advice on how you can increase your likelihood of getting an Offer in Compromise accepted by the IRS.

How does the IRS Offer-in Compromise Operates?

IRS accepts an offer in compromise under the following circumstances:

  1.       Upon acknowledgment between you and the IRS, you have no feasible way to clear your tax debt. It means you neither have enough income to pay off nor valuable assets that the IRS can seize.
  2.       You agree to pay the IRS maximum amount you can afford even though the debt is far short of actual tax debt.
  3.       The IRS accepts that the amount you are paying is the most it can reasonably collect from you and therefore compromises and lower your tax debt to an amount you can pay.
  4.       Once you complete paying the agreed-upon amount, the debt is considered fully paid even if you only initially paid a small percentage of what you owed to the IRS.

How does the IRS Accept an Offer in Compromise?

There’s no doubt the IRS follows strict guidelines, and qualifying for an Offer in Compromise is tough. First, you must be compliant with IRS regulations. Failure to file your current tax returns means you are not compliant with IRS provisions.

If you are looking to file your tax returns but don’t know where to begin, you can always contact Ideal Tax specialists here. Their team is experienced enough to handle all your tax-related questions for individuals and businesses.

Now that you have your current tax fillings, submit the IRS Form 9465 requesting an Offer in Compromise.

Why does the IRS Reject an Offer in Compromise?

Filling in the IRS Form 9465 is straightforward, but the IRS still can reject an Offer in Compromise.

So, the success of an Offer in Compromise depends on the business or individual financial and liability circumstances. That’s why we advise you to create a strong case proving your inability to pay your taxes before submitting an Offer in Compromise. Note that you won’t still qualify if you agree that you can fully pay your tax liabilities through an installment agreement or through whichever means.

Under Which Criteria does the IRS Accept an Offer in Compromise (OIC)?

As we have already discussed above, IRS follows strict regulations when accepting an Offer in Compromise, but it can be any of the following reasons:

  1.       The IRS can accept your Offer in Compromise when doubt as to liability exists. This means there is a genuine dispute over the correct amount of tax debt owed by the taxpayer.
  2.       Next, when the IRS accepts a compromise because of doubt as to collectibility. The IRS doubts that the amount owed can be fully collected because the taxpayer’s income and assets can fully pay the tax debt.
  3.       Finally, when the IRS accepts a compromise based on effective tax administration. This means that parties acknowledge that tax is legally owed and the amount owed is collectible, but to make the payment in full will create financial hardship for the taxpayer and, therefore, inequitable and unfair.

Hire IdealTax for Tax Debt Resolution Services Today

IdealTax staff are a combination of bankers and attorneys with years of experience in financial and tax debt resolution services. When you work with our team of professionals, you are guaranteed actionable advice at affordable rates. Don’t allow taxes to affect your financial position.

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