The IRS Offer in Compromise (OIC) program allows taxpayers to settle their debt for less than they owe, but the eligibility requirements are fairly strict. You must meet all of the following conditions just to be considered for an OIC.
No Unfiled Tax Returns
The IRS won’t even look at your offer if you have unfiled tax returns. Instead, they will keep any money you sent in and apply it to your tax debt and then return your offer.
Don’t bother submitting an OIC until you have filed all of your delinquent tax returns.
No Open Bankruptcies
You can’t be in the middle of a bankruptcy proceeding when you submit your offer. Handle your tax debt in your bankruptcy first, then consider an OIC after your bankruptcy case is closed.
Tax debt is sometimes dischargeable in bankruptcy, but that will depend on the type of bankruptcy, how old the debt is, and other factors.
Stay Current on Estimated Taxes
You need to be up-to-date on your estimated tax payments for the current year. If you own a business with employees, you need to make your federal tax deposits for the current quarter.
No Open Audits or Innocent Spouse Claims
If you are under audit or have a pending innocent spouse claim, you should not submit an OIC. The audit could result in additional tax liability, and the innocent spouse claim could give you relief from some or all of your back taxes.
Make sure you know exactly how much you owe for all tax years before sending in your OIC.
Unable to Pay in Full
If you can afford to make monthly payments using an IRS installment agreement, you generally won’t have your OIC accepted. If you can tap into your equity in assets and pay in full, your offer will also be rejected.
The IRS uses a complex calculation to determine how much you can afford to pay. Your offer amount needs to be equal to or greater than the number the IRS comes up with.
Don’t waste your time submitting an Offer in Compromise if you aren’t eligible. Talk to a tax attorney to determine if you qualify or what other tax resolution options to explore.
Get help with your Offer in Compromise application by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.