IRS Offer in Compromise
IRS Offer in Compromise
Much spoken about and rarely understood, the IRS Offer in Compliance (OIC) program is an agreement between you and the IRS to settle your tax liability for less than you actually owe. This offer can be difficult to qualify for, but it can help to substantially reduce your tax liability more so than most other avenues.
Need an experienced IRS attorney to look at your financial situation and give you an honest answer? Strategic Tax Lawyers can help. Contact us today.
The IRS may accept an OIC based on three circumstances:
1. Doubt as to collectability – If doubt exists that the taxpayer could fully pay the amount of tax liability owed within the remainder of the statutory period for collection, then an OIC is a possibility.
For example, if a taxpayer owes $20,000 for unpaid tax liabilities (and monthly income does not meet necessary living expenses), but the taxpayer does not have the ability to pay the amount in full or in installments, then an OIC may be an option.
2. Doubt as to liability – If a legitimate doubt exists that the assessed tax liability is correct, then an OIC is a possibility. Reasons to submit a doubt as to a liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence.
For example, assume the taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes and the taxpayer was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2005. Since the taxpayer had resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.
3. Exceptional circumstances (Effective Tax Administration) - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
For example, assume Mr. & Mrs. Taxpayer have assets sufficient to satisfy the tax liability and provide full time care and assistance to a dependent child, who has a serious long-term illness. It is expected that Mr. and Mrs. Taxpayer will need to use these assets to provide adequate, basic living expenses and medical care for the child. There is no doubt that the tax is correct.
How do you know if you’re a good candidate for an OIC? How much can your tax liability be reduced? Find out now by contacting our experienced team of IRS tax attorneys. We’ll provide you with a free analysis of your financial situation and answers to your questions.
Contact us today. (800) NOW-IRS-LEVY or (800) 669-4775
Why Strategic Tax Lawyers, LLP
Not all IRS lawyers are created equal. Our legal team is run by a former IRS Tax Attorney who represented the IRS for over 8 years. Now, he’s using this experience to your benefit, helping to ensure that your legal tax rights are protected to their full extent. We’ve been successfully negotiating settlements for over a decade. We have an impressive track record of many clients settling with the IRS for a fraction of what they owe. Let us do the same for you.
If you need to know about the IRS Offer in Compromise, the official IRS page on this topic is a good idea. The relevant Form 656-B can be found on the IRS site as well. Need more answers? Search a specific question on Google.