Once a taxpayer successfully submits an Offer in Compromise (OIC) application to the IRS, certain events occur as the IRS considers whether to accept the OIC. Offer in compromise applications typically require specific IRS forms and substantial paperwork to document and substantiate the position taken by the taxpayer in the OIC application. An experienced tax professional is often crucial in ensuring that all the information necessary to support an offer is presented to the IRS.
Taxpayers are required to submit an initial payment based on the offer and payment option they choose. They may select to pay by Lump Sum Cash and thereby submit an initial payment of 20 percent of the total offer amount with the application. Then, any remaining balance due on the offer is paid in five or fewer payments.
Taxpayers may also choose to pay by Periodic Payment and thereby submit the initial payment with the application. The taxpayers must continue to pay the remaining balance in monthly installments while the offer is under consideration by the IRS. If the IRS accepts the OIC, the taxpayer continues to make monthly payments until the OIC is paid in full.
Certain events occur while the IRS considers accepting a taxpayer’s Offer in Compromise:
- The IRS applies any non-refundable payments and fees to the tax liability. Taxpayers may designate a specific tax year and tax debt to which payments may be credited);
- The IRS may file a Notice of Federal Tax Lien;
- The IRS suspends collection activities;
- The legal assessment and collection period is extended;
- Taxpayers are required to make all payments associated with the OIC;
- Taxpayers are not required to make payments on an existing installment agreement; and
An Offer in Compromise is automatically accepted if the IRS does not render a decision within two years of the IRS receipt date. Once accepted, a taxpayer must meet all the terms of the OIC, including filing all required tax returns and making all payments. Any refunds due within the calendar year in which an OIC is accepted are applied to the taxpayer’s outstanding tax debt. Federal tax liens are not released until a taxpayer satisfies the offer’s terms. If an OIC is rejected, a taxpayer may appeal this decision within 30 days.
If you have unresolved tax debt and have questions about how to resolve it, contact the tax professionals at The Gartzman Law Firm, where an experienced tax attorney can provide answers. Call The Gartzman Law Firm at (770) 939-7710.