Tax Debt: Can an Offer in Compromise Help You?


An Offer in Compromise (OIC) is a tool available to taxpayers who wish to settle their tax debt. It is an agreement between a taxpayer and the IRS that settles a taxpayer’s tax debt for less than the full amount owed. Before the IRS accepts a taxpayer’s Offer in Compromise, they consider the taxpayer’s unique factors and circumstances.

Before Submitting an Offer in Compromise

  • The IRS will NOT accept an OIC if the taxpayer can afford to pay what they owe.
    • If the taxpayer can afford to pay the tax liability, they should consider other
      payment options.
  • A taxpayer must have filed all required tax returns.
  • If the taxpayer is in a pending bankruptcy proceeding, they CANNOT submit an OIC.
  • The taxpayer must address their tax debts within the context of their bankruptcy
    proceeding.
  • A taxpayer CANNOT have any late tax deposits.
    • A business-owners making quarterly IRS payroll tax deposits must be up to date for the current and previous two quarters.
  • A taxpayer CANNOT have a pending investigation with the Department of Justice (DOJ).
    • If the IRS referred the taxpayer’s case to the DOJ for prosecution relating to tax crimes, the taxpayer cannot submit an OIC for the tax years covered by the DOJ investigation.

Reasons the IRS Will Accept an Offer in Compromise

The IRS will accept an OIC when the following circumstances exist:

  • Doubt as to Liability: There is a genuine dispute over the existence or amount of correct tax debt owed.
  • Doubt as to Collectability: There is doubt that the amount owed is fully collectable. This can happen when the taxpayer’s assets and income are less than the full amount of the tax liability.
  • Effective Tax Administration: There is no doubt over the tax owed. And requiring payment would create an economic hardship for the taxpayer.

Migration Resource Center Taxpayer Legal Services

The Migration Resource Center staff has a team of tax consultants, tax attorneys,
enrolled agents, and CPAs. We can assist you with reducing tax liabilities, eliminating tax disputes, negotiating IRS payments, and providing ethical tax representation and tax resolutions.

Please contact us at (646) 827-2959 or use our webform to schedule a free tax
consultation
.

By: Jacob Joseph, Law Clerk – Sep 14, 2020