Can I Get An Offer-in-Compromise?

Offer-in-Compromise

I help taxpayers settle debts with the IRS and often they are interested in an Offer-in-Compromise or at times a taxpayer is unaware they can benefit from this provision. An Offer-in-Compromise aka an offer or OIC is where the IRS accepts less than the total amount owed by a taxpayer to settle the outstanding debt. Yes the IRS may consider this option but many don't really understand how the process works and they fail to obtain OICs much more often than they succeed. However, understanding the process, the options available, and the resulting strategies increase the likelihood of success. 

Myths about Offer-in-Compromise

There are many myths about OICs that you need to be aware of:

1. You have to Offer at least 25% or the IRS will not consider it. Debts have been settled for much less in the right circumstances.
2. You have to file the OIC when the IRS is really busy, during the tax season, to have a better chance of success. In reality, knowing how the process works it then does not matter when you submit the OIC.
3. It is not worth it because the IRS never accepts OICs. I have successfully helped clients obtain Offers so this is not true. It again is probably someone who never learned the process and failed many times and has not resigned to never successfully filing an offer. 

The Process

The key in the process is understanding the IRS's Reasonable Collection Potential (RCP) calculation. The second key is understanding strategies available to reduce the Reasonable Collection Potential and hence the offer amount. As long as the offer amount meets or exceeds the RCP then the offer should be accepted. 

There are also two forms of offers, a lump sum and a periodic payment or Short-Term Deferred Offer. It is also important to understand these two options and the strategies associated with each one.

Qualifications

In addition to the RCP there are other requirements to get OICs accepted. According to IRS Topic 204 the following are also required to get an OIC accepted.

"To qualify for an OIC, the taxpayer must have filed all tax returns, made all required estimated tax payments for the current year, and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees."

Move Forward

The first step in filing an OIC is to file back tax returns and get current with your tax payments. This may seem daunting if you have not filed returns for years but I can help you with this. Believe me, you have been carrying around the weight of responsibility for this for too long. The time to get in compliance is now and then we can work on the payments with the IRS. In addition, penalties and interest can continue to accumulate. The sooner you get into compliance the sooner we can work out those debts and work at putting this behind you so you can move forward. 

An Offer-in-Compromise can be a financial lifesaver for a taxpayer. But OICs are complicated and involve a lot of strategy and a lot of work. In addition, there may be other options available to the taxpayer to help them with there tax debt, like an installment agreement. To know which option is best will require an evaluation of the taxpayers circumstances. Regardless of the time of year, it is always best to act quickly as the longer it is put off the more anxiety will be involved in moving forward. So to act now by contacting me to arrange a consultation to discuss your circumstances. I charge a small fee for the consultation which can be applied to my fees to represent you in negotiations with the IRS. The time to act is now so use my email before to contact me about scheduling a consultation.

These can be stressful times for taxpayers and negotiating with the IRS can add to anxiety. For me it is what I do and I can help you to try to get a resolution with the IRS for your tax debts. So contact me today using my email address below to arrange a consultation via a phone, Zoom, or Skype call.

Jeff Haywood, CPA

The CPA Superhero

jeff.jhtaxes@gmail.com

Posts:

Owe Back Taxes - Need to File Back Tax Returns - Feel Better - Move Forward

Before Filing All Those Back Tax Returns - Read This

The Impact of Non-Filing and Non-Payment of Taxes

Can I Get An Offer-in-Compromise

What Will The IRS Do If I Don't File My Tax Returns

Tax Debts and Bankruptcy

High Income Non-Filers Need to File ASAP - Field Collections Still Ongoing

The IRS is sending agents to your home - If you are a high-income taxpayer who has failed to timely file tax returns

IRS Passport Certifications - IRS People First Initiative

Anxiety and Tax Problems - The CPA Superhero

What Should I Do if "I owe back taxes"? - The CPA Superhero

Is Your Passport in Jeopardy Because of Taxes? - The CPA Superhero

IRS Tax Issues: Late Filing, Need to Settle Your Tax Debt, or both? - The CPA Superhero

Negotiating With the IRS to Work Out Tax Settlements - The CPA Superhero

Need to File Years of Tax Returns - The CPA Superhero

Can I Get an Installment Agreement for My Tax Debt? - The CPA Superhero

Be careful when reading about tax law and its application, including my articles, because the wording and definitions are such a challenge and are influenced by writers perspective, specifically his own clients situations that he is mindful of and other situations the writer is not thinking of. The point is talk to your CPA about your situation and circumstances and don't rely on or make conclusions based on articles you read, including articles form irs.gov, because concepts and definitions are not very clear, and of course, they are subject to change. Now is the time to be having discussions about your situation and developing strategies for you and your business. Again, contact me using my information above to discuss your situation. I help business owners all over the U.S. and in foreign countries with their tax returns.