What is an Offer in Compromise?

If you believe you have an insurmountable tax debt, you may be eligible to submit an offer in compromise to permanently resolve your outstanding tax liabilities.

Through the Offer in Compromise (OIC) program, the government has the ability to accept less than what is owed.  While the Internal Revenue Service takes into account several factors, such as age, health, and public policy reasons, offer in compromises are primarily based on two main factors:

  • Income (and potential future income)
  • Assets

If there are sufficient assets or income to cover the outstanding tax liability, the IRS will typically reject the taxpayer’s offer in compromise.  Therefore, it is very important to properly analyze your financial situation before submitting an offer in compromise to the government.

What You Should Know About an IRS Compromise

When you submit an Offer in Compromise, the IRS will not engage in enforced collection action.  Most offers are typically reviewed within one year from submission.  If the IRS does not review or decide on your offer within two years, the offer is automatically accepted. The IRS is most likely to accept an offer if the taxpayer shows he/she has limited collection potential.

Many firms promote the OIC program to unqualified taxpayers. It is important to realize that both the approval process and calculation of the specific offer amount can be complicated and time consuming. Though submitting an offer in compromise sounds tempting and can be a great option, it is very important to exercise caution before you decide to go forward with the process.   For more information about an OIC, please call 1.800.777.3800 or contact TaxFirm.com.

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