Published on December 8, 2009
Questions and answers regarding irs offers in compromise : Questions and answers regarding irs offers in compromise Brought to you by: Roni Deutch What’s an Offer In Compromise? : What’s an Offer In Compromise? An OIC is an IRS tax resolution program that allows a taxpayer to settle their IRS back tax liability by paying less than they owe. The amount of a taxpayer’s needs to pay will vary depending on the taxpayer’s unique financial situation, as well as his or her original liability amount. However, it is usually significantly less than the tax debt owed. The IRS will only accept a taxpayer’s OIC if it is equal to or greater than the reasonable collection potential, which is the IRS’s measurement of the taxpayer’s ability to pay their debt. Most taxpayer’s will not qualify for this program. How do I submit an Offer in Compromise? : How do I submit an Offer in Compromise? You will need to complete and submit an OIC to the IRS. The OIC package generally consists of the following documents: IRS Form 656 – Offer in Compromise Form IRS Form 656-A – Income Certification for Offer in Compromise, if you believe you are not required to submit an application fee or payments based on your family unit size and income. Form 433-A – Collection Information Statement for Wage Earners and Self-Employed Individuals Form 433-B – Collection Information Statement for Businesses (if applicable) $150.00 Application Fee 20% payment Can someone help me prepare an OIC? : Can someone help me prepare an OIC? Yes, you can hire a tax lawyer or a tax resolution professional to prepare and submit an OIC for you. However, submitting an OIC does not guarantee that it will be accepted. You must meet certain financial and other criteria in order to qualify. Additionally, you will need to have filed all necessary tax returns for both yourself and any business you own, and you cannot be a debtor in bankruptcy proceedings. Thus, be wary of any company sales representative that tells you your OIC will be accepted. What fees do I have to pay upon submitting my OIC? : What fees do I have to pay upon submitting my OIC? You will need to pay a $150.00 application fee, as well as a check or money order for 20% of the lump sump offer. What happens if I submit my offer without the 20% payment? : What happens if I submit my offer without the 20% payment? If you submit your offer without the 20% payment, then the IRS will reject your offer as not processable, and will return your OIC and $150.00 application fee back to you. Is it possible to submit the offer without paying the fees or payment? : Is it possible to submit the offer without paying the fees or payment? Yes, the IRS will allow you to submit an offer without the $150.00 application fee or the 20% payment if you meet the IRS’s low-income taxpayer requirements. For more information about who qualifies as a low income taxpayer, check out this page on the IRS’ website . Will an OIC remove a wage garnishment or bank levy? : Will an OIC remove a wage garnishment or bank levy? Having an OIC accepted will not automatically remove a wage garnishment or bank levy. However, an accepted OIC will resolve your tax liability with the IRS so that you can request to have your garnishment or levy released. For more information regarding how to get an IRS tax lien released, check out this blog entry . How long will it take to receive an approval or denial? : How long will it take to receive an approval or denial? It can take the IRS several months to review your OIC. Additionally, once the IRS performs an initial review, they may have questions or require clarification from you regarding some of the representations that were made in the OIC. As such, there is really no way to tell how long it will take for the IRS to respond to your OIC. Who’s an ideal candidate for an Offer in Compromise? : Who’s an ideal candidate for an Offer in Compromise? Since every taxpayer’s financial situation is unique, there is no general rule on who would make for an ideal candidate for an OIC. However, if you are struggling to pay your bills and would like to know more about the IRS Offer in Compromise program, then click here for a free IRS tax debt analysis . What if my offer is rejected? : What if my offer is rejected? If your OIC is rejected, you still have other options to resolve your tax debt. You might qualify for placement into Currently Not Collectible status, which would essentially end all IRS collection activity on your account unless your financial situation changes. Or, you might qualify for an Installment Agreement that would allow you to pay off your tax debt through manageable monthly payments.