IRS Offer in Compromise
Sometimes, you just can’t afford to pay your taxes. Fortunately, there are ways to get those collection calls from the IRS to stop. The IRS offers a variety of programs meant to help taxpayers get caught up on their taxes.
Occasionally, the IRS allows taxpayers to settle their tax bills for less than the full amount of back taxes owed. This is called an offer in compromise.
A tax lawyer from The W Tax Group can help you decide if an offer in compromise is right for you. If so, we’ll help you negotiate with the IRS to settle your tax bill for as little as possible. If not, we’ll help you find the best resolution option for your tax situation.
What Is an Offer in Compromise (OIC)?
An offer in compromise is when the IRS agrees to settle your tax liabilities for less than you owe. In most cases, you must pay the offered amount in a lump sum, but in some cases, you can take up to 24 months to pay off the offer.
To determine if you qualify, the IRS looks closely at your unique financial situation. Some of the items the IRS considers when deciding whether you will qualify, include the following:
- Your income
- Your ability to pay your taxes in full
- Asset equity
- Your expenses
When you apply for an offer in compromise, you must provide the IRS with detailed information about your finances. To ensure the best chances of approval, you may want to work with a tax professional.
Am I Eligible for an IRS Offer In Compromise?
There are many eligibility requirements for the IRS offer-in-compromise program. Understanding these requirements can be difficult, so it’s usually helpful to have a tax professional review your tax situation to see if you’re eligible.
Here are some of the general eligibility requirements for the OIC program:
- You must have received a bill regarding at least one of the tax liabilities you’ve included in your offer.
- You must have filed the appropriate tax returns.
- You must have made all required estimated tax payments during that year.
- You must not be reasonably capable of paying your tax bill in full.
- Additionally, if you are in the process of filing bankruptcy, you will not be eligible for an offer in compromise.
How to Apply for an Offer in Compromise
To apply for an offer in compromise, you must submit the following forms to the IRS:
- Form 656 (Offer in Compromise)
- Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals)
- Form 433-B (Collection Information Statement for Businesses)
You use Form 656 to make the offer in compromise. Then, you use Form 433-A to tell the IRS about your personal financial situation, and if applicable, you detail your business finances on Form 433-B. These forms are extremely detailed, and you must include financial documents to back up your claims.
Finally, you need to include a $205 application fee (as of 2022). If you’re offering to pay off the taxes in a lump sum, you should include a 20% downpayment, and if you’re asking for a periodic payment offer in compromise, you should include your first monthly payment.
Taxpayers with low incomes don’t have to pay the application fee or include a downpayment with their applications. The instructions for Form 656 have an income chart that can help you see if you qualify for low-income status.
What Happens If the IRS Accepts Your Offer in Compromise?
While reviewing your offer, the IRS may request additional information. Make sure you respond to these requests promptly, or the IRS will reject your offer and you will not be able to appeal.
The IRS will notify you in writing if your offer in compromise is approved. With lump-sum offers, you have five months to make the payment. With periodic payment offers, you make monthly payments for between six and 24 months.
The IRS will also keep any refunds you earn for the tax year the offer was accepted. For instance, if your offer is accepted in 2022 and you file your 2022 return in April 2023, the IRS can keep that refund. This amount does not reduce how much you have to pay for your offer in compromise.
For the next five years, you must stay compliant with tax filing and payment obligations. If you don’t file or pay your taxes during that time frame, the IRS has the right to rescind your offer and demand payment for the full tax liability.
What Happens If the IRS Rejects Your Offer in Compromise?
The IRS will notify you in writing if your offer in compromise is rejected. The IRS will keep the downpayment you made and apply it to your tax bill. Then, you will still owe the remaining amount.
At this point, you need to act quickly to make other arrangements on your tax bill. Our tax attorneys can help you choose the best option for your situation.
Can You Get an Offer in Compromise on State Taxes?
Tax laws vary from state to state. Our tax attorneys can help you determine if you may qualify for an offer in compromise on your state taxes.
If you have Michigan state back taxes, you are in luck — The Michigan Department of Treasury does have an offer in compromise program. If you qualify for a MI offer in compromise, you may be able to settle your tax liability for less than you owe.
Our Tax Team Can Help with Your Offer in Compromise
Completing the necessary tax filings and applications for an offer in compromise on your own is entirely possible, however, it is complicated and can take a considerable amount of time and tax knowledge.
If you believe you might be eligible for an offer in compromise, contact the W Tax Group to review your circumstances . With our free tax case review, we can evaluate your finances and other eligibility requirements to see whether you qualify for this IRS program to settle your back taxes.
To learn more, call us directly right now at 877-500-4930 or submit a consultation request.
Benefits of Working with The W Tax Group
We have processed thousands of IRS tax cases, and we have saved hundreds of millions of dollars in tax relief for our clients. Here are the benefits of working with our office to resolve your back taxes:
- We deploy in-house licensed tax attorneys, CPAs, and business tax professionals to help our clients.
- You will have a dedicated case manager so you are never alone and never in the dark.
- After your free consultation, if you choose to use our services, we offer a 15-day money-back guarantee.
- We know money may be tight, so we offer affordable payment plans for our service fees.
- We are respectful and always keep your conversations confidential.
- We have hundreds of five-star customer reviews.
- We are licensed to work in every state in the nation.
- Our initial consultations are always 100% free.
To learn more, check out the The W Tax Group Services F.A.Q where we answer the most common questions our customers have.