Taxes

IRS Offer in Compromise

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.

The above definition was taken directly from the IRS website. In plain English, the IRS will accept a lower tax repayment if you are able to prove that you cannot pay the entire bill. Remember, the IRS is a government agency and they will have access to banks, city documents that they may look into to see if you have any real property or personal property that can be used to pay the tax bill.

What Are My Chances?
If you are able to prove your inability to pay off your huge tax bill, chances are very high that the IRS will take your Offer in Compromise. There have been people who have reduced a $50,000 tax bill to about $8,000 since they simply did not have any money to pay the government. The best bet is if you have a huge tax bill, is to go through a CPA and employ their services. Most CPAs have submitted hundreds of Offer in Compromise and know the best strategies in getting it approved. Visit this Tax Settlement site to be contacted by a professional.

How Do File an Offer In Compromise?
There is an initial $150 application fee that must be submitted along with Form 656. There are 3 payment options that taxpayers are able to select:

  • Lump Sum Cash Offer
  • Short Term Periodic Payment Offer
  • Deferred Periodic Payment Offer

Read more at the IRS website.

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