Offer in Compromise
What You Should Know About the IRS Offer in Compromise Program
Can you settle your tax debt with the IRS for less than what you owe? The answer to this is yes, you can.
In a nutshell, an Offer in Compromise (OIC) is a tax relief program from the IRS that allows you to settle your back taxes for less than the amount owed.
This tax debt compromise program provides very valuable tax relief. It’s an opportunity for you to get back on track financially by settling your tax debt for a much lower amount.
Here, we’ll review the details of an Offer in Compromise and the OIC process. Read on to discover what IRS offer tax relief options may be available to you.
What Is an Offer in Compromise?
An Offer in Compromise is a tax relief program in which the IRS agrees to accept less than the amount of money you owe on a tax debt as payment in full. If you qualify for an OIC and pay the offer amount, you wipe clean the tax debt you owe. This includes interest and any penalties.
To be clear, the IRS may agree to accept your offer, but it is not legally obligated to do so. Taxpayers don’t have a legal right to automatically have back taxes reduced. The IRS has the sole discretion to accept or reject offers to settle. This offer decision depends on the taxpayer’s financial situation and their ability to pay their tax debt.
The IRS gives your offer fair consideration. If you submit an accurate OIC you can expect the IRS to review it and make a reasonable decision. It can’t be stressed enough that submitting an accurate offer is critical in the IRS Offer in Compromise process.
The IRS wants you to settle tax debt sooner rather than later. If your financial condition justifies tax relief, they are likely to approve your offer.
Who Is Eligible for an OIC?
The IRS determines offer eligibility. Individuals who apply for an OIC and would never be able to pay back the full amount of their tax debt with their current income and assets are the ones who the IRS typically approves for the Offer in Compromise tax relief program.
From the official IRS website:
“[IRS Offer in Compromise] 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.”
Your offer to the IRS must show why you’re experiencing financial hardship for you to qualify.
How Long Does the Offer Process Take?
The OIC timeline can vary according to your personal financial circumstances. On average, it takes the IRS about four to six months to review your offer. The better, more complete, and accurate your personal and financial information is the faster the IRS can determine whether they’ll accept an Offer in Compromise tax relief request.
Incomplete information can make the OIC process take longer, as you may have to re-submit offer application forms. With Wiztax, we take the guesswork out and make everything simple. You can start free here.
What Are Possible Outcomes for an Offer in Compromise?
If the IRS agrees that the amount you offer for repayment (which is the “Minimum Offer Amount” that Wiztax calculates and provides for you) is the most that they can legitimately expect to collect from you, they’ll likely accept your Offer in Compromise. Then, once you’ve paid the determined offer amount, the IRS will settle your tax debt in full.
How Likely Is the IRS to Accept an Offer?
There is no rule that provides exact and specific information on whether the IRS will approve your Offer in Compromise. You significantly increase chances of receiving a “yes” when you apply for an OIC with an accurate offer. Wiztax can help with this. At Wiztax, we will NOT work on an offer for you if we believe that you are ineligible.
When Will I Know If the IRS Accepted My Offer?
You can expect to hear whether the IRS accepted your Offer in Compromise in around four to six months.
Can I Get a Tax Refund If I Have an OIC?
The IRS modified its Offer in Compromise tax relief refund policies in 2021 to benefit taxpayers. Changes apply to those who had their OIC accepted or have their OIC application pending review. Before this change, taxpayers with an OIC would lose refunds for the year the IRS accepted their offer. Also, OIC applicants didn’t qualify for a refund while their offer request was pending.
Offer in Compromise 2022
The IRS Fresh Start Program has made it easier to qualify for an offer by having more favorable OIC requirements. Due to COVID-19 hardships and high inflation, more taxpayers need tax relief flexibility.
This is especially true for people who can’t pay and must reduce the total amount they owe the IRS. An OIC helps taxpayers avoid tax liens, wage garnishment, and bank account levies.
Offer in Compromise Next Steps
Filing an Offer in Compromise and understanding the OIC requirements can be tricky. You don’t want to make a mistake with your offer filing that causes your application to be delayed or rejected. At Wiztax, we specialize in IRS tax relief help.
We never charge for consultations or “investigations.” You can get started for free right away by answering six simple questions.