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Understanding more about the IRS and offers in compromise

As unnerving as it can be to carry seemingly insurmountable tax debt, it's important for people in these situations to understand that they not only have rights, but they also have viable options for resolving this pressing problem.

Indeed, one such option is the offer in compromise, or OIC, which is essentially an agreement between you, the taxpayer, and the Internal Revenue Service to settle an outstanding tax debt for less that than the amount owed.

As promising and perhaps simplistic as an OIC can seem, it's important to understand that it is actually an incredibly complex legal matter and that while the IRS does want to provide people with a chance at a "fresh start," it will not accept anything less than what it considers to be your true ability to pay.   

Indeed, taxpayers should know that the submission of an OIC in no way guarantees that the agency will accept it. Rather, all it does is initiate an in-depth analysis of your unique circumstances by agency investigators, including whether you could reasonably pay the entirety of the tax debt owed via lump sum or installment agreement.  

Furthermore, taxpayers should know that there are certain eligibility requirements that must be satisfied before the IRS will even consider an OIC, including:

  • All outstanding and otherwise legally required tax returns must be filed.
  • Estimated tax payments for the current year must be paid.
  • Tax deposits for the current quarter must be made if the filer owns a business with employees.
  • There must be no open bankruptcy proceedings.

We will continue to examine this complex topic in future posts. In the meantime, please consider consulting with a skilled legal professional if you have questions about your options for resolving back taxes or tax debt.  

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