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Offer In Compromise
Offer and Compromise

What Is The Offer In Compromise Program?

The Offer in Compromise program allows a taxpayer to settle tax liability for less than the full amount owed. This type of settlement through the IRS may be a proper option if a taxpayer cannot pay the total tax liability. Also, if proven with your reasonable collection potential, that paying will create a financial hardship. Your reasonable collection potential takes into thought any equity in assets you own.

  • Assets are Real property
  • Vehicles
  • Investment accounts
  • Whole life insurance policies

  • Retirement accounts
  • Bank accounts 
  • Own business
  • Equity in assets

it also takes into thought a taxpayer’s total household income versus their total household expenses. Once the financial result of income and expenses is achieved, net discretionary income is figured. This figure will show that a taxpayer has an ability to pay or that their leftover income is in the negative. If negative, the taxpayer is in financial hardship. If under any event you become incapable of paying the full amount of your tax liability within the IRS collection timeframe, you will more than likely qualify for an Offer. 

Offer and Compromise

Installment Agreement Offer

An Offer in Compromise may not be the prime route for a taxpayer to take if the tax liability can be fully paid through an Installment Agreement or other payment plans. Anyone can request an Offer through the IRS. It is in the best interest for the taxpayer to contact a trained expert in tax resolution to assist you with the process. Working with a trained expert allows you a service to complete the process efficiently. They are trained to inform the taxpayer through every step of the way. They can also make you aware of all your taxpayer rights.
Offer In Compromise

These tax experts know all the rules and regulations within the IRS manual.They are experienced in walking the taxpayer through the most efficient steps to get to the preferred result. Having a trained firm and active Power of Attorney (POA) on your case gives both security and a knowledge benefit that a taxpayer needs when working with the IRS in defining your tax duties.

WHAT ARE THE DIFFERENT TYPES OF OFFERS?

There are three types of an Offer in Compromise that may be sent to the IRS. The most common type being the “Doubt as to Collectability”. This Offer option would be most ideal for taxpayers who are not able to pay the full amount of the tax liability and are looking to settle for a total offer amount that is less than the federal tax amount owed. The IRS provides an Offer booklet in which all the needed forms to complete the request can be found. First, a taxpayer will have to submit a Form 656, Offer in Compromise. In addition, you will need to include a financial statement; Form 433-A(OIC) for individuals and Form 433-B(OIC) for businesses, along with all supporting documents to show the current asset value, monthly income, expenses and liabilities.

Offer In Compromise
Two Types Of Offers

Doubt and Liability

The other two types of Offers are “Doubt as to Liability” which means the taxpayer does not agree that they owe the tax liability assessed against them or, an “Effective Tax Administration” which means the  taxpayer may have the ability to full pay the tax liability but by doing so it would create a financial hardship. For example, a taxpayer may own their own home free and clear of a mortgage and have a large amount of equity, however, due to a severe illness, the taxpayer would need to use the entire amount of their equity to pay for medical treatment. 
Offer In Compromise
Application Fee

Why Do You Have To Pay an Application Fee?

In order to go forward with an Offer in Compromise, a $186.00 application fee as well as a down payment with the initial filing of the request, is required by each applicant. Depending on the payment method that is elected with the offer, a taxpayer may or may not have to begin paying for the proposed offer amount when the application is filed. A lump-sum payment plan requires that a 20% down payment of the total offer amount be made with the application. Upon acceptance, the leftover total of the offer amount must be paid within five months.

Upon acceptance, the leftover totalof the offer amount must be paid within five months. A periodic payment method requires that the taxpayer make 24-monthequal payments of the offer amount even while the request is pending review.

Offer in Compromise is Accepted

What Happens After Acceptance?

Once an Offer in Compromise is accepted, a taxpayer is held to the highest standard for a period of five years. This means there cannot be any late-filed returns or new balances. If a tax return is filed with a balance owed, then payment in the full amount will have to be sent at the time of filing. A taxpayer must also be sure to make all required tax payments timely. If a business is involved, then Estimated Tax Deposits should be made quarterly. If there are wages earned, proper withholding through your employer should be determined.
Offer In Compromise

Omni Tax Help

Once all payments are remitted according to the schedule chosen with the Offer, any liens that have been placed on your assets will be removed. However, if any of the Offer in Compromiserules are broken within the five-year period, then the Offer in Compromise request will be null and void. Once the Offer is returned, all balances will be put back into the total liability. At that time, the offer will be rejected, and liens will be re-filed against your assets.

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