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IRS Offer in Compromise

The IRS Offer in Compromise (OIC) program was established by the U.S. Congress to help taxpayers who have experienced significant financial problems to get a fresh start, if they qualify. Back tax liabilities, penalties and interest can be settled. All federal tax liens can be released once the IRS accepts the Offer in Compromise (OIC) and the negotiated settlement amount is paid.

If you qualify for the IRS Offer in Compromise (OIC) program, you can save thousands of dollars in taxes, penalties and interest. Taxpayers can negotiate settlements on all types of taxes, including most payroll taxes, penalties, and interest. It is the closest thing to amnesty that the federal government offers in connection with back tax debt.

Taxpayers should bear in mind however, that the Offer in Compromise program is a privilege, not a right such as bankruptcy. That being said, it is a very subjective process where the IRS has the final word. The OIC process is a very complicated drawn out process that can take upwards of nine months to a year and even longer. There are guidelines, rules and protocols established by operation of law, under IRC Section 7122. However, most Offer Examiners (former Revenue Officers) use the Internal Revenue Manual (IRM) as their guide.

FLAT FEE TAX SERVICE will not allow clients to retain us for the purpose of submitting a frivolous OIC. In other words, if we don’t feel the client is a viable candidate for the program, we won’t let a potential client retain us for an IRS Offer in Compromise (OIC). We put our clients through a rigorous in-depth interview to find out if they really do qualify for an IRS Offer in Compromise. Most taxpayers do not. But you may be eligible for another IRS program.

If an inexperienced taxpayer attempts to go through the Offer in Compromise process without proper expert Tax representation, their Offer in Compromise will not only get rejected but they will end up owing the IRS more money in additional accruing penalties and interest than when they started the OIC process.

At least one of three conditions must be met to qualify a taxpayer for IRS Debt Relief consideration of an IRS Offer in Compromise (OIC) Tax Settlement:

• Doubt as to Collectability — You can show that the IRS Tax Debt is likely uncollectable in full by the IRS under any circumstances. Doubt exists that you, the taxpayer, could ever pay the full amount of your tax liability owed within the remainder of the statutory period for collection.
• Doubt as to Liability — You can show reason for doubt that the assessed tax liability is correct. A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability Offer in Compromise include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence..
• Effective Tax Administration — You do not contest your IRS Tax Debt liability or collectability but can demonstrate extenuating or special circumstances that the collection of your IRS Tax Debt would "create an economic hardship or would be unfair and inequitable." This form of IRS Offer in Compromise (OIC) program is available for you, the taxpayer, but is primarily used by individuals that are elderly and receiving Social Security or may be disabled and receiving Social Security Disability / SSDI benefits, or may have special extenuating circumstances.

Federal Tax Regulation

1. The IRS will not execute an IRS Wage Levy/ IRS Wage Garnishment or Levy against the property or rights to property of a tax payer who submits and Offer in Compromise (OIC).
2. The IRS will not collect the liability that is the subject of the IRS Offer in compromise (OIC) during the period the Offer in Compromise(OIC) is pending.
3. The IRS will not proceed with collections for 30 days immediately following the rejection of the IRS Offer in Compromise, and for any period when a timely filed appeal from the rejection is being considered by Appeals.

Once the IRS decides that your IRS Offer in Compromise (OIC) is processable for IRS Tax Relief and that the IRS Offer in Compromise includes all the paperwork and forms properly filled out, the IRS must stop IRS Wage Garnishment / IRS Wage Levy / IRS Bank Levy actions under §6331.

On the other hand, if your IRS Offer in Compromise is missing documents, forms or information, the IRS can (and the IRS will ) return the paperwork to you as un-processable, and the IRS can (and the IRS will) then proceed with an IRS Wage Garnishment or IRS Wage Levy of your wages / paycheck / property. In other words, the IRS will try to discourage and confuse you.

Paying Your IRS Offer in Compromise.In general, a taxpayer must submit a $150 application fee and initial payment along with the Form 656, Offer in Compromise. Taxpayers may chose to pay their offer in compromise in one of three payment options:

1. Lump Sum Cash Offer.
2. Short Term Periodic Payment Offer.
3. Deferred Periodic Payment Offer.

Low Income Exemption and Guidelines

The application fee is waived if your (not a corporation, partnership or other entity) income falls at or below IRS Low Income Guidelines. Qualifying taxpayers are also exempt from making any OIC payments while you Offer in Compromise is being investigated.

Five Year Compliance

If your IRS Offer in Compromise is accepted, you must timely file all tax returns and timely pay all tax for five years or until the offered amount is paid in full, whichever period is longer. Failure to adhere to these terms will result in default of your IRS Offer in Compromise and the IRS may then collect the amounts originally owed plus penalties and interest.

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