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Offers In Compromise

The Offer in Compromise (or OIC) program, in the United States, is an Internal Revenue Service (IRS) program under 26 U.S.C. § 7122 which allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed to clear the debt. A taxpayer uses the checklist in the Form 656, Offer in Compromise, package to determine if the taxpayer is eligible for the offer in compromise program. The objective of the OIC program is to accept a compromise when acceptance is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements.

An Offer in Compromise is a way for a taxpayer to settle a liability to the IRS at a reduced level when there is (1) doubt regarding the actual tax liability, (2) and the collection of debt or (3) when the collection of the debt would create a hardship for the taxpayer.

In order to submit an offer a financial analysis must be doe on the taxpayer.  The offer is usually based on an analysis of the taxpayer’s net equity and future earnings taking into consideration the amount the IRS could collect through enforcement collection procedures.  In addition the taxpayer needs to be in full compliance upon filing an offer meaning that all returns to date must be filed.  The dollar amount submitted for an offer usually is the taxpayer’s net equity in assets plus their monthly income minus the allowable expense times 60.

It is very important to consult with a professional when submitting an offer.  The financial analysis and issues involved are very complex and are instrumental in your offer.   IRS Help has handled thousands of Offers in Compromise.  The can help decide what the best solution is for you and negotiate on your behalf to maximize the change that the IRS will accept your offer.