Understanding Offer in Compromise (OIC)
Offer in Compromise (OIC) is a program offered by the IRS that allows taxpayers to settle their tax debt for less than the total amount that they owe. OIC is a great option for taxpayers who are unable to pay their back taxes in full and want to avoid collection actions, such as wage garnishments and tax liens. With OIC, taxpayers can make a lump sum payment or a series of payments over time to settle their tax debt.
Eligibility Criteria for OIC
Not all taxpayers are eligible for OIC. The IRS considers several eligibility criteria before accepting an OIC: Complement your reading with this carefully selected external content. Inside, you’ll discover worthwhile viewpoints and fresh angles on the topic. how to settle credit card debt, enhance your learning experience!
It is essential to note that even if a taxpayer meets these criteria, the IRS may still reject their OIC if the IRS believes the taxpayer can pay their tax debt in full.
Preparing and Submitting an OIC
Submitting an OIC requires completing IRS Form 656, Offer in Compromise. The form requires detailed financial information that must be supported by documentation, including bank statements, pay stubs, and proof of insurance. An OIC requires upfront payment of a non-refundable application fee, and the taxpayer can choose between two different payment plans:
The IRS can take several months or even a year to review and decide whether to accept or reject an OIC. It is essential to continue making timely payments on your account while the offer is under consideration.
Negotiating with the IRS on Your OIC
As stated earlier, the IRS can take several months to review your OIC. During this time, the agency may request additional information or documentation to support your offer. It is also possible for the IRS to reject your offer or come back with a counteroffer. If the IRS proposes a counteroffer, the taxpayer has an opportunity to accept or reject the proposal and continue negotiating.
It is crucial to remember that OIC is only one option among many that the IRS offers. The agency has other options for taxpayers that can’t pay their tax debt in full, including filing a Request for a Collection Due Process or Innocent Spouse Relief. It would be best to consult with a qualified tax professional who can assess your situation and advise you on alternative options. Check out Investigate this informative document external source to gain more insight into the topic. debt relief, explore the subject more extensively.
The Bottom Line
Offer in Compromise is an excellent solution if you are struggling to pay your back taxes. However, the process can be complicated and require significant effort to prepare and submit. If you are considering an OIC, it is crucial to take it seriously and engage the services of a qualified tax attorney or certified public accountant who can guide you through the process and ensure that your submission is reasonable and adequate.