What Is an Offer in Compromise?
An offer in compromise, often known as an OIC, lets you clean up your tax debt at a discount — sometimes an enormous discount of up to 90 percent. Len has even settled cases for less than 1% of the total liability. Once the IRS agrees to settle your tax debt for less than what you owe, you may pay the settlement in a lump sum, over five months, or even up to two years.
Do You Qualify?
Qualifying for an OIC isn’t always automatic. The IRS has to believe that either:
- There’s doubt as to whether they’ll be able to collect the full amount due from you, either now or in the future; or
- Collecting your full tax bill would be unfair or inequitable or would cause you economic hardship.
In addition, to qualify you must be current on filing all your tax returns due, and you must be making all required estimated tax payments for the current tax year.
Generally, the IRS bases its decision regarding acceptance of an OIC on your “reasonable collection potential” — this is the IRS’s calculation of what they think you can pay. To calculate this figure, they look at all your assets (including cash, investments, real estate and automobiles), as well as at your anticipated future income. The IRS wants your OIC amount to be at least equal to your reasonable collection potential.
Check out the IRS’s online pre-qualifier tool to see whether you might qualify for an OIC.
The Process of Submitting an Offer in Compromise
The process of submitting your OIC is formal and complex. Few taxpayers have the experience or knowledge to do it on their own and that’s why Len Stauffenger, Esq. is here to help. Once the OIC form is submitted and the filing fee paid, we continue to help you collect the required financial documents.
This is likely to include several months’ worth of paycheck stubs, documentation of all other income, all your bank statements, information regarding any business or real property you own and detailed information about all your expenses. If you live in a community property state, your spouse must provide all the same information, even if the tax debt is yours alone.
Even if the tax debt is yours alone, your spouse must provide their financial information as well. The IRS won’t make them liable for your taxes, but their income affects your ability to pay.
Experience Tax Relief
The IRS doesn’t have to accept your OIC — but in recent years, it has loosened up a bit and has been accepting more OICs than ever before. At Len Stauffenger, Esq., we can tell you if an OIC is the right choice for your tax situation. Enjoy the sense of relief that comes from knowing there’s a solution to your tax debt problems by giving us a call at 888-814-1701 for a free consultation.