Offer In Compromise (OIC)
The IRS Fresh Start Program offers the Offer in Compromise (OIC) program to help taxpayers with tax debt. The OIC is an agreement between the taxpayer and the IRS that settles a tax debt for less than the full amount owed. The taxpayer must make an appropriate offer based on what the IRS considers your true ability to pay.
How The OIC Program Works
An in-depth financial analysis of the taxpayer’s income, expenses, assets, and debts determines if the taxpayer is eligible for the OIC option. An OIC will not be offered if the IRS determines that the tax debt can be settled in full as a lump sum or through a payment agreement.
If a taxpayer qualifies for an OIC, the IRS will reduce the tax liability and set up a payment schedule. All offers must be paid in full within 24 months, once the offer is accepted.
Eligibility Requirements for Offer in Compromise
- File all tax returns you are legally required to file
- Have received a bill for at least one tax debt included on your offer
- Make all required estimated tax payments for the current year
- Make all required federal tax depositss for the current quarter if you are a business owner with employees
Application Fee for Offer in Compromise
There is a $205 application fee for Offer in Compromise. If you are an individual and meet the Low Income Certification guidelines, there is no requirement to send money with your offer.
Payment Options for Offer in Compromise
When submitting your offer, you must select a payment option and include the initial payment. Your initial payment and subsequent payments depend on the total amount of your offer and the payment option you select. (Initial and monthly payments are not required if you meet the Low-Income Certification guidelines.)
There are two types of payment options:
- The Lump Sum Cash Option requires 20% of the total offer amount to be paid with the offer. The remaining balance must be paid in 5 or fewer payments within 5 or fewer months of the date your offer is accepted.
The Periodic Payment Option requires you to make the first payment with the offer. The remaining balance must be paid in monthly payments within 6 to 24 months in accordance with your proposed offer terms.
While the IRS is evaluating your offer, you must continue to make monthly payments. If you fail to make these payments at any time prior to receiving a final decision letter, the IRS will return your offer. You cannot appeal this decision. Total payments must equal the total offer amount.
If you are an individual, use the OIC Pre-Qualifier tool located on the IRS website at http://irs.treasury.gov/oic_pre_qualifier/ to assist in determining a starting point for your offer amount.
How to Apply for Offer in Compromise
To apply for the Offer in Compromise, you must include
- Form 656, Offer In Compromise
- Completed and signed Form 433-A (OIC), Collection Information Statement for Wage Earns and Self-Employed Individuals, if applicabl
- Completed and signed Form 433-B (OIC), Collection Information Statement for Businesses, if applicable
- $205 Application Fee, unless you meet Low-Income Certification Guidelines
- Initial offer payment based on the payment option you choose, unless you meet Low-Income Certification Guidelines
After You Submit Your Application for Offer in Compromise
After you apply, the IRS will review your offer application. If you get a request for more information, reply to the IRS promptly to avoid having your offer returned without appeal rights.
If the IRS accepts your offer, you must file and pay all future taxes timely, including estimated tax payments. If you fail to make any payments timely within the 5 years after your offer was accepted, you will be in default, making you liable for the original tax debt, less payments made, and all accrued interest and penalties.
How Rockwater Associates Can Help
If you need assistance with the Offer in Compromise application process, call Rockwater Associates. We’d be glad to help you. Our tax professionals at Rockwater Associates have helped many individuals and small businesses successfully resolve their tax debt using the Offer in Compromise program. We offer a comprehensive analysis of your tax liability and can develop a customized and actionable plan for tax relief.
With decades of experience working with the IRS and every State, Rockwater Associates is your best hope of reaching a better deal. Almost everything is negotiable, including back taxes.
If you choose to partner with Rockwater Associates, you will be working with some of the industry’s brightest and most experienced professionals. Our communication, honesty, and transparency in our processes make us the right choice to provide a solution to your tax debt problem. Our number one priority is providing you with a great customer experience.