What is the IRS Offer and Compromise Program?

It is what I call the Golden Goose, the best program the IRS offers. It is called The Offer and Compromise program or OIC for short. It is not easy to qualify for. In certain instances, the service or IRS may allow a taxpayer to settle their tax debt for less than what they currently owe.

The OIC program or offer in compromise program is a full disclosure program. Meaning they, the IRS will look at everything you own. They will take into consideration your monthly income and liabilities, your personal and or business assets. They poke around into every aspect of your financial history. They will pull bank records, real estate records and credit reports.

There are two types of Offers in Compromise programs for personal and businesses.

• Doubt as to Liability – If you believe you don’t owe as much as you do, you will file form 656 L

• Doubt as to Collectability – You don’t have enough assets or income to full payback what you owe, you will fill out form 656.

• Effective Tax Administration – You may have enough assets to full payback what you owe, but by doing so it could cause a financial burden to you or your business.

• Businesses can also apply for an OIC.

There are a lot of things to consider before applying for an offer in compromise. So, what are some of the cons of filing for an offer in compromise?

• A federal tax lien will get filed against you and any asset you have. It is also recorded with local county records and thus public knowledge. Consider if a tax lien will hinder you in anyway. Are you getting ready to sell a property or are you planning on purchasing a home or refinancing? Do you know if you have a federal tax lien already filed against you?

• If the offer is denied it will extend the date of expiration or CSED date by six months.

• Are you okay with the IRS digging into every aspect of your financial history? YIKES

Some of the positives of filing for an offer in compromise will be:

• Release of a federal tax lien 😊

• Receipt of refunds – you will start receiving tax refunds one year after the offer is fully paid.

• No more stressing about tax debt, no more letters or notices from the IRS.

This program is not for the faint of heart. There are a lot of moving parts to it and although it appears easy to understand and submit for. The IRS guidelines set forth for this program are not. Simple put if you have other means to pay your IRS debt an offer in compromise is most likely not going to be suitable for you. Next week we will dive into more detail about what the IRS looks at when reviewing an offer. Tell then! Have a wonderful Labor Day and stay safe!