Offer in Compromise

What Is an Offer in Compromise?

An Offer in Compromise (OIC) is an IRS program that allows you to settle your tax debt for less than the full amount owed if you can demonstrate financial hardship or doubt about the debt’s collectability. It’s a way to resolve significant back taxes or other liabilities when paying in full isn’t possible.

Why Is an Offer in Compromise Useful?

An OIC provides relief by:

    • Reducing the total debt to a more manageable amount.
    • Stopping IRS collection actions, like liens or levies, during the application process.
    • Offering a fresh start if you qualify and meet the terms.

However, the IRS accepts only about 40% of OIC applications, so precision and thorough preparation are critical.

Options for Pursuing an Offer in Compromise

You can apply for an OIC in a few ways:

 

    • Do It Yourself: Complete IRS Form 656 and provide detailed financial information on Form 433-A (individuals) or 433-B (businesses). You’ll need to calculate your ability to pay, gather extensive documentation, and meet strict eligibility rules—errors or incomplete submissions often lead to rejection.
    • Work with the IRS Directly: Contact the IRS for guidance, submitting forms and answering questions over the phone or in writing. This requires understanding complex IRS criteria and maintaining accuracy, which can be challenging without expertise.
    • Hire a Tax Professional: A professional is the best way to pursue an OIC. They assess your finances, prepare and submit the application, and negotiate with the IRS to maximize approval chances. If your tax debt involves multiple years or penalties, a professional can address those issues to strengthen your case.

Need Advice?

Schedule a free consultation with a Tax Advisor to review your unfiled back taxes and explore solutions. Contact us today to take the first step.
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