Tax Offer in Compromise Law

Tax Offer in Compromise

What is a Tax Offer in Compromise?

If a taxpayer has a large debt that they cannot financially afford, they might need to explore the option of a tax settlement, in which the IRS agrees to lower the total amount owed by the taxpayer. This agreement between the IRS and taxpayer is also known as an Offer in Compromise (or OIC). An Offer in Compromise would allow the taxpayer to settle their tax liabilities for less than the original debt owed. It is essentially a "discount" on your tax bill.

If the IRS accepts an Offer in Compromise, the newly agreed upon debt amount can be paid one of two ways: either in a lump sum, in which the taxpayer will have to pay 20% of the total upfront and then the remaining balance within 5 months; or through a payment plan, in which the total debt can be paid in periodic payments, but must be paid off within six to 24 months. During this time, there usually will be no interest or late penalty fees added to the total balance of the tax bill, provided payments are made on time and within the time limit.

An Offer in Compromise can allow a taxpayer in debt to pay off what is owed, avoid penalties, avoid fines, and avoid wage garnishments.

About Offer in Compromise Legal Issues:

Taxpayers need to apply for an Offer in Compromise and only a small percentage of applications are approved. To qualify for an OIC, you would need to prove one of the following:

  • You do not have enough income or assets to be able to pay your tax debt off within the next 10 years.
  • Paying the full tax debt would cause you further "economic hardship."
  • There is legitimate doubt over the total amount the IRS claims that you owe.

To apply for an Offer in Compromise, you will need to not only fill out the necessary forms, but also submit multitudes of financial records to the IRS, including pay stubs, bank records, investments, living expenses, assets, your spouse's records, and more. If your offer is rejected, the IRS can accelerate its collection of your full debt. Also, while you are waiting for the OIC to be approved or rejected, your tax bill is subject to accruing interest.

What a Tax Lawyer Can Do For You:

Applying for an Offer in Compromise can be a daunting task. It is within your best interest to hire an experience tax layer to help you through this process. A tax lawyer will first help you determine if you are eligible for an OIC, and will then help you determine your offer which is based on your excess monthly income plus the "net realizable value" of your assets. The IRS will only accept an offer that is the maximum amount you can reasonably afford. They will determine this based on what they calculate your "reasonable" collection potential to be. A tax lawyer can help make sure your offer is not too low, so that you have the best chance at making sure your offer is accepted. There are other legal considerations when negotiating an Offer in Compromise that an experienced attorney can help you navigate. There are also special considerations that might apply to you. Speak with a tax lawyer to determine if an Offer in Compromise is the best route for you to take to lower your tax debt.

Lawyer Referral Service:

Attorney Search Network can provide you with a referral to an experienced tax lawyer to help you apply for an Offer in Compromise.

If you have any questions about the information provided above, please contact us. Call us toll free at (800) 215-1190 or fill out our online form for your Tax lawyer referral.

If you have any questions about the information provided above, please contact Attorney Search Network.