How does an offer in compromise work with the irs?

A compromise offer (OIC) is a part of the IRS fresh start program which entails an agreement between a taxpayer and the IRS that settles a taxpayer's tax obligations for an amount lower than the total amount owed. Taxpayers who can pay their obligations in full through an installment agreement or other means will generally not qualify for an OIC in most cases. A compromise offer is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. A compromise offer is an option when a taxpayer is unable to pay the full amount of their tax liability.

It is also an option when paying the full tax bill could cause financial difficulties for the taxpayer. The goal is to reach a compromise that benefits both the taxpayer and the agency. A pledge offer (OIC) is when the IRS accepts an amount lower than the total amount the taxpayer owes. You can pay a lump sum for five months OR make monthly payments over a 24-month period.

A compromise offer is an IRS tool that allows us to settle your tax debt for an amount lower than the total amount you owe. If you qualify for an OIC, the IRS will then determine how much it will accept from you to pay off the debt. This amount of offer is also called reasonable collection potential (RCP). This is the amount that the IRS can reasonably charge you before the collection law expires.

And if your situation is serious enough, you could even qualify for a partial forgiveness of the IRS debt in the form of a compromise offer. If you have reason to believe that you could qualify for IRS debt forgiveness through a compromise offer, see the offer contained in the commitment booklet and Form 656. The first thing to do with the commitment offer is to start with section one, which asks for personal and family information, such as name, date of birth, social security number, etc. This amount is called the offer amount and represents a calculation of how much the IRS will accept to settle a tax bill. The IRS can find these things and you don't want to be accused of missing anything from the offer.

At that point, if your offer has been accepted, continue making monthly payments until the balance is paid in full. But since we usually make money when you find an offer you like and receive, we try to show you offers that we think are right for you. The reason you need to credit accounts with a zero balance is because, when the OIC unit receives one of these offers, it will analyze your name in Accurint to see what your assets are and then analyze your credit report. The amount of the offer accepted by the IRS will depend on your financial situation, and you will need to disclose it in great detail on Form 433-A (for employees and those who are self-employed) or 433-B (for companies).

If you offer to pay a lump sum, your down payment must be 20 percent of the total amount of the offer. Before making an offer to the IRS, check your eligibility and understand what the IRS considers. If you offered it for 80 percent of its value, someone would probably come and buy it pretty quickly. The agency suggests that taxpayers “explore all other payment options before submitting a pledge offer.” For example, if you follow a specific diet and can show that it offers significant health benefits, you can claim it.