What is an Offer in Compromise ?
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service (IRS) that resolves your tax liability for less than is actually owed.
What are the requirements for an OIC?
In order to be considered for an OIC, you must meet all of the following requirements:
I qualify for an installment agreement, can I still submit an OIC?
If a tax liability can be paid in a lump sum or through an installment agreement, you will not be considered for an OIC. If an OIC is received, it will be rejected with appeal rights. The only exception is if you request an OIC under the effective tax administration provision.
The IRS recently levied my bank account. Will the levy proceeds be returned if I file an offer in compromise?
The IRS will keep all payments and credits made, received or applied to the total original tax liability before the OIC was submitted. The IRS may also keep any proceeds from a levy that was served prior to the submission of an OIC, but which were not received at the time the OIC was submitted.
Can I stop sending payments as part of my approved installment agreement once I file an offer in compromise?
No. Installment agreement payments must be continued while the OIC is being considered. Installment agreement payments will not be applied against the amount you offered.
Can taxes be settled by offering pennies on the dollar?
OICs must include an amount equal to or greater than the total value of all assets, plus future income. That total is generally the reasonable collection potential amount, and not simply an offer of ten cents on the dollar, or a percentage of the debt.
How much is the application fee and when does it begin?
The IRS has established an application fee that will recover part of the cost of processing and reviewing offer in compromise requests. The application fee for submitting an OIC is $150 is required upon submission of the offer. The application fee is in addition to the offer amount.
What happens if I do not submit the OIC application fee with the OIC?
Unless you submit an OIC under the doubt as to liability provision, or certify that your income falls below the poverty line, the IRS will return the OIC as not processable.
What if my OIC is not accepted, will the application fee be refunded to me?
No. Generally, the IRS will retain the fee.
What happens if an OIC is submitted using the wrong forms?
Failure to submit the required forms and documents will cause considerable delay in the process, and likely cause the offer to be rejected.
What happens if the IRS accepts an OIC?
If an OIC is accepted, the following will apply:
You must remain in compliance with filing and payment of all tax returns for a period of five years from the date the OIC is accepted or until the OIC is paid in full, whichever is longer.
What happens if the IRS does not accept an OIC?
Once the IRS determines it cannot accept an offer, you will be advised of the reasons behind the decision. Normally, you will then be afforded another opportunity to submit any other information that might cause the IRS to reconsider it preliminary decision to reject the offer.
How much interest am I going to pay if my OIC is accepted?
Interest will not accrue on your accepted OIC amount from the date of acceptance until the OIC is paid. Interest and penalties will continue to accrue on the unpaid tax liability while the OIC is under consideration.
What happens if I do not meet all the terms of my accepted OIC?
The IRS may default the OIC and reinstate the entire tax liability, less all payments and credits received.
What happens if I do not file my tax return or pay my taxes next year?
The OIC will be defaulted. An OIC requires future compliance for a period of five (5) years from the date of acceptance of the OIC, or until the offered amount is paid in full, whichever is longer. Compliance is the timely filing and paying of all required returns and taxes.
