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Offer in Compromise

An Offer in Compromise (OIC) is an agreement between the taxpayer and the IRS that settles a tax liability for payment of less than the full amount owed. The IRS will generally accept an OIC when it is unlikely that the tax liability can be collected in full and the amount offered equals at least the amount that the IRS calculates that it can collect from the taxpayer.

The process of submitting an Offer in Compromise and obtaining IRS acceptance of the offer is complicated. Success in the Offer in Compromise area requires significant skill and full compliance with IRS regulations, procedures and guidelines. The experience, skill and judgment of your representative can make the difference between approval and rejection of your offer.

The IRS goal in approving an OIC is to collect the amount that it believes to be collectible from a taxpayer as quickly and economically as possible. Further, the IRS hopes that its acceptance of an offer will create for the taxpayer a fresh start toward compliance with all future filing and payment requirements. Once an offer is accepted, the taxpayer must remain in compliance with all filing and payment requirements for the next five years.

Please call Mr. Brown directly at 817.870.0025, or click here to request a confidential consultation regarding whether an Offer in Compromise might help solve your tax problem.

There are three different payment periods over which an offer amount can be paid, and three different types of Offers in Compromise:

Payment Periods:

  • Cash
    offer amount paid in full 90 days or less after IRS accepts offer
  • Short-Term Deferred Payment
    accepted amount paid out over a period of 90 days to 24 months
  • Deferred Payment
    accepted amount paid according to agreed upon payment terms over the period remaining on the collection statute of limitations

Types of Offers in Compromise:

  • Doubt as to Collectability. The IRS will accept an Offer in Compromise when doubt exists as to whether you could ever pay the full amount of tax owed. Appropriate collection information statements along with all required supporting documents must be submitted in order to have the IRS consider a doubt as to collectability Offer in Compromise.
  • Doubt as to Liability. The IRS will accept an Offer in Compromise when doubt exists as to whether the assessed tax is correct. This method only applies if you can prove that you do not rightfully owe the tax assessed against you. It does not apply when you are simply unable to pay the tax liability.
  • Effective Tax Administration (ETA). An ETA offer is made when a taxpayer agrees with the delinquent tax amount that the IRS is seeking to collect and would be able to pay the full amount owed, but exceptional circumstances exist that would make an IRS acceptance of the offer appropriate. To be eligible for an ETA compromise, you must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

After the offer has been submitted, and the IRS has completed its review, you will be notified that the IRS has accepted or rejected your Offer in Compromise. If the Offer in Compromise is rejected, you have a variety of alternatives available. For example, you can appeal to the IRS Appeals Office, and ultimately, the United States Tax Court, propose an alternative collection method (for example, an Installment Agreement), or seek to be classified as Currently Not Collectible. On the other hand, if the Offer is accepted, you must make the payments proposed in the Offer and the remaining amount of the tax liability will be forgiven.

Please call Mr. Brown directly at 817.870.0025 or click here for a confidential consultation regarding whether an Offer in Compromise might solve your tax problem.