Settle Your Tax Debt with an Offer in Compromise

An Offer in Compromise (OIC) is a method to settle your tax debt with the IRS for less than the full amount owed. Essentially, you offer to pay a portion, and the IRS forgives the rest. This option is ideal for those unable to pay their full tax bill, offering a fresh financial start.

Eligibility for an Offer in Compromise

To qualify for an OIC, you must meet specific criteria. The IRS requires that you have filed all necessary tax returns and attempted to make estimated tax payments. Your eligibility will also depend on your ability to pay, income, living expenses, and assets. Generally, the IRS will accept an OIC if the amount you offer is the most they can reasonably expect to collect within a certain timeframe.

How an Offer in Compromise Works

An OIC allows you to settle your tax debt for less than the full amount. To apply, you need to submit forms to the IRS along with a $205 fee. You can choose to pay the offered amount in a lump sum or in periodic payments. For a lump sum offer, you must submit 20% of the proposed amount with your application. For periodic payments, you make an initial payment followed by monthly installments until the IRS makes a decision.

Application Process for an Offer in Compromise

To apply for an OIC, submit the required forms, provide documentation of your financial situation, pay the application fee, and make the initial payment. The IRS has up to two years to decide on your application; if they don't decide within this period, your offer is automatically accepted.

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