An Offer in Compromise (OIC) is a way to settle your tax bill with the IRS without paying the full amount that you owe. In effect, you offer to pay the IRS a certain amount and the IRS forgives the remaining balance of your debt.
This option can help taxpayers who cannot afford to pay their full taxes get a clean slate with the IRS.
To qualify for an OIC, you need to meet a few eligibility requirements.
The most important is that the IRS will not consider an OIC unless you have filed all of your required tax returns and at least made an attempt to make required estimated tax payments. Beyond that, your ability to qualify for an OIC will depend on your ability to pay, income, living expenses, and assets.
In general, the IRS will accept an OIC when it believes that the amount you’re offering to pay is the maximum it can expect to collect within a reasonable time period if it used its typical collection process.
An OIC lets you settle your tax debt for less than the full amount that you can owe. To apply, you must submit forms to the IRS and pay a $205 fee.
You can request an OIC with a lump sum payment or with periodic payments. If you choose to offer a lump sum payment, you must submit an initial payment of 20% of the offered amount with your application. If you choose periodic payments, you’ll submit an initial monthly payment and make monthly payments going forward until the IRS accepts or declines your offer.
To apply for an OIC, you have to submit multiple forms to the IRS, documentation of your financial situation, an application fee, and an initial payment. The IRS has up to two years to make a decision about your application. If it does not, your offer is automatically accepted.
Serving individuals and businesses in all 50 states, Tax Hardship Center provides tax debt relief from the convenience of your home.
