11 Nov O is for Offer in Compromise
You have probably seen TV commercials saying “Settle Your Back Taxes for a Fraction of What You Owe” or “Settle Your Tax Bill for Pennies on the Dollar” it sounds appealing but in reality, it’s not so easy to get the IRS to settle a tax debt for pennies on the dollar. It’s also illegal to say that! It does happen, but only in cases where a taxpayer clearly does not have the assets and/or income to pay off the tax debt in a reasonable time. If you have the money to pay the IRS–or will likely have it in the future–no amount of negotiating will convince the IRS to settle for less than you owe.
What these commercials are talking about is getting the IRS to accept an offer in compromise (PIC).
What is an Offer in Compromise?
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer’s tax liabilities for less than the full amount owed. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won’t qualify for an OIC.
The IRS will accept your OIC only if they determine that:
- you aren’t able to pay the full amount in a reasonable time, either as a lump sum or over time through a payment agreement
- there is doubt that you owe the tax in question, or
- there is doubt as to the amount of your tax liability (unusual), or
- due to exceptional circumstances, payment in full would cause an “economic hardship” or be “unfair” or “inequitable.” As an example, you can’t work due to health problems, or you’d be left with no money to pay your basic living expenses if you sold your assets to pay your tax bill in full.
The OIC program is geared toward a specific segment of taxpayers — people who will never be able to pay all of the debt with their future income or assets before the IRS runs out of time to collect it (generally, 10 years from the date the tax was assessed). For most people, there are IRS alternatives to the OIC that work out much better for their situation.
How long does an offer in compromise take?
An offer in compromise is only accepted when you agree to give the IRS an amount that they would be able to get from you through enforced collections. This step — the examination — can take anywhere from 4 weeks to 8 months, depending on who you get as an examiner and the complexity of your situation.
We at SFS Tax Problem Solutions are experts at navigating the IRS maze and will determine if an OIC is right for you and we will customize a resolution plan to fit your individual needs to help you permanently solve your IRS Problems. Call us today at 977-355-8010 for a free confidential strategy session.