How Do "Offers In Compromise" Work?

Contrary to popular belief, the IRS does not have an "amnesty" program for those who owe a lot of back taxes they cannot pay. However, if you are current on filing your returns, they sometimes may be willing to settle for less than what you owe, if you meet the criteria for the Offer In Compromise program.

An OIC is only feasible if you have access to funds that the IRS cannot otherwise touch, AND you would be unlikely to pay the taxes you owe within five years. In general, the sum of the resale value of any assets they can seize from you, plus the present value of the payments they could expect to receive from you for the next 5 years, would be the MINIMUM offer amount that they would likely consider. If you have an offer approved, you are also making a contract with the IRS that you will not be delinquent in taxes for any reason for the next five years; if you are, the offer is rescinded.

If you feel that you may qualify for an Offer In Compromise, your best alternative is to seek out a tax professional who deals with a lot of OICs, and let him or her advise you. If you cannot afford to use a tax professional for guidance, call your local IRS office and ask to meet with someone to discuss the possibility of an Offer In Compromise. You will need to provide the person helping you with copies of your most recent tax bills, plus complete financial information about your assets, liabilities and current income/expenses.

(c) Copyright 1995-2015 by TaxLogic