Offer in Compromise
The IRS Program called Offer in Compromise (OIC)
is an agreement between the taxpayer and the government
that settles a tax liability (including all penalties
and interest) for payment of less than the full amount
owed. When the IRS accepts your Offer and you pay it,
then all federal tax liens are removed. You must remain
compliant by filing and paying your tax returns for the
next five consecutive years, or the liability will be
re-assessed and all penalties and interest will be assessed
as well. If you do comply, though, you will get your life
back!
The IRS will generally accept an OIC when it is unlikely
that the tax liability can be collected in full and
the amount offered reasonably reflects collection potential.
An OIC is a legitimate alternative to declaring a case
currently not collectible or to a "protracted installment
agreement.". The IRS goal of an OIC is to achieve
collection of what is potentially collectible at the
earliest possible time and at the least cost to government.
Preparing and successfully negotiating an Offer in
Compromise is a very complicated process and can take
more than 6-18 months. Once your offer has been submitted
to the IRS all collection activities against you stop.
An offer in compromise is an agreement between a taxpayer
and the IRS that resolves the taxpayer's tax debt. The
IRS has the authority to settle, or "compromise,"
federal tax liabilities by accepting less than full
payment under certain circumstances.
A tax debt can be legally compromised for one
of the following reasons:
Doubt as to Liability - Doubt exists that the assessed
tax is correct
Doubt as to Collect ability - Doubt exists that you
could ever pay the full amount of tax owed.
Effective Tax Administration - There is no doubt the
tax is correct, and no doubt that the amount owed could
be collected, but an exceptional circumstance exists
that allows the IRS to consider a taxpayer's OIC. To
be eligible for a compromise on this basis, the taxpayer
must demonstrate that collection of the tax would create
an economic hardship or would be unfair and inequitable.
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