Offer in Compromise, or OIC for short, is an agreement between the IRS and a taxpayer that allows the taxpayer to settle their tax liabilities for an amount less than the actual unpaid amount. It is, however, worth mentioning that taxpayers who are financially capable of paying their tax liability in full are ineligible for an OIC. If you owe a hefty amount to the IRS and are looking for relief, it is advisable to apply for an Offer in Compromise. To help you gain insight into the provision, in this blog post, we cover all you need to know about the IRS Offer in Compromise.
Qualification Criteria
Not every taxpayer qualifies for an offer in compromise or OIC. The IRS has a qualification criteria that taxpayers need to fall under the OIC consideration. The criteria states that a taxpayer is eligible for offer in compromise if:
- There exists a “doubt as to collectibility”.
If there exists any doubt regarding whether the IRS collects the tax bill from the taxpayer, they may eligible for OIC.
- There exists a “doubt as to liability”
In some scenarios, a taxpayer may be eligible for OIC if there is a doubt about the accuracy of the tax liability assessed by the IRS.
- Miscellaneous conditions
If a taxpayer after paying their entire tax bill may face financial problems, they may be eligible for OIC.
Application Process
Before submitting an offer to the IRS, it is essential to do your research and check whether you are eligible for OIC. You can also seek expert advice as to how to go about your current tax issue. Having that said, the process of submitting an offer is formal, and therefore you need to follow a set of defined steps for the IRS to receive, check, evaluate, and give you the green light for an offer in compromise.
If you file offline, it is important to attach the fee along with Form 656 and mail it to the IRS. Along with Form 656 and the application fee, you are also required to provide complete financial information using the Form 433-A or Form 443-B, “A” category for individuals whereas “B” category for businesses. Other information you need to provide the IRS include marital status and Collection Information Statement.
After you finish the form filling process, the IRS will ask for proof that will include financial documents, such as vehicle registrations, bank records, and other documentation. Follow the process to the book for speeding up the process of getting the decision from the IRS.
Recourse in Case of Denial
In case the IRS denies your OIC application, the IRS will most likely provide a written reason for the rejection. The IRS can reject an OIC application for various reasons, a few including: the taxpayer made an offer that was too low, or they have a criminal record. In case the rejection is due to an unacceptable offer, the IRS letter will mention an amount that is acceptable. Another thing you are entitled to in case of denial is a copy of the rejection report. You can, however, appeal to a rejected offer in compromise, but it is essential you meet the criteria mentioned below.
- All information requested by the IRS must be furnished in the time-frame when your offer was being processed.
- All past tax-returns are filed
- All tax payments are complete for the present year.
Looking for IRS Debt Relief? Seek Professional Help
Whether you are filing for an offer in compromise or appealing to a rejected offer, it is advisable to seek the help of a professional who can guide you in the right direction. We, at the Law Offices of Nick Nemeth, have a team of experienced IRS tax lawyers specialized in dealing with all sorts of IRS tax related issues. To schedule a consultation, simply call (972) 426-2553, or fill out our contact form and we will get back with you, shortly.
