What are IRS Offer In Compromise Requirements?

What are IRS Offer In Compromise Requirements?

If you owe back taxes to the IRS or if you’ve delayed paying your tax bill, you may have options to settle for less than the outstanding amount. This program is called an Offer in Compromise (or OIC). We can help you find out more about OIC requirements:

What Is an Offer In Compromise?

In a nutshell, an Offer in Compromise is a settlement plan from the IRS that allows you to settle your tax debts for less than the amount owed.

Who Is Eligible For an OIC?

Eligibility for an OIC is determined by the IRS. Individuals who would never be able to pay back the full amount with their current income and assets are the ones that are typically approved for this program.

From the IRS website:

“Eligibility is determined by asset equity, ability to pay, and income versus expenses. The IRS will present an offer that is the most that they expect to collect in a reasonable amount of time.”

In addition to demonstrated financial hardship, the IRS will not accept any offers unless you (and your jointly filing spouse) have filed all past due to tax returns. You must have also made the required estimated tax payments or otherwise have proper withholding on your paystub. If you’re currently in the process of declaring bankruptcy, you also are not eligible.

What Happens In the Application Process?

During the application review time, other collection activities are suspended and the legal assessment and collection period is extended. A Notice of Federal Tax Lien may be filed. You must still make all required payments associated with your offer, although you won’t be required to make payments on an existing Installment Agreement.

What Happens When My OIC is Accepted?

If your offer is accepted you must make all payments, file all tax returns, and comply with all the Offer Terms listed in Section 7 of Form 656 (the OIC filing form). If you have any tax refunds due to you in the year that your OIC offer is accepted, those tax refunds are applied to your debt. If you have federal tax liens, those won’t be released until your debt is completely cleared.

You have two payment options available to you:
  • The first is a lump sum cash payment, with 20% due when your offer is accepted, and the balance paid within 5 subsequent payments.
  • The second option is periodic payments. while your application is being reviewed, you’ll keep making the monthly payments and, if accepted, maintain the monthly payments until it’s paid off.
Ready To Get Started?

Filing an Offer in Compromise and understanding the OIC requirements can be tricky, and you don’t want to make a mistake with your filing that can cause your application to be delayed or rejected. At Wiztax, we specialize in IRS tax relief help. Our system will guide you every step of the way. You can get started for free and learn more about how we can help.


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