An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS that resolves the taxpayer’s debt for less than they owe. If you owe the IRS or State more than you will ever be able to pay, there is good news. The IRS and most States have the authority to settle or “compromise” tax liabilities by accepting an amount less than what is fully owed under certain circumstances.
Types of Offers in Compromise
An IRS tax debt may be legally compromised under any of the following conditions:
Doubt as to Collectability – Doubt exists that the taxpayer would ever be able to pay the full amount of tax owed.
Doubt as to Liability – Doubt exists that the assessed tax is correct.
Effective Tax Administration – There is no doubt the assessed tax is correct, and there is no doubt that the full amount owed could be collected, but an extraordinary circumstance exists that allows the IRS to consider a taxpayer’s OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.
Taxpayers should be aware that many relief companies make false claims that their tax debt may be settled for “pennies on the dollar” through the Offer in Compromise Program. While it is true that debts may be reduced in some instances, it is imperative to ensure that the Offer in Compromise requirements will be satisfied prior to submitting an offer in compromise.
We can help
If you believe you qualify for an offer in compromise, contact us to discuss the details. If for any reason you will not qualify, that does not mean that we cannot address your tax issues in another way.
In certain cases, the IRS allows companies to submit an offer in compromise while remaining in business. In order to qualify for this type of offer, the business needs to show that they will be unable to pay their liability due to an outlying circumstance such as the death of a partner or a natural disaster. Reasons such as these indicate that the business will not be restricted from paying their taxes going forward. Explaining to the IRS that the company experienced a “slow” period will not suffice as reason to request a compromise.
We can help
If you believe your business qualifies for an in-business offer in compromise, contact us to discuss the details. If for any reason your business will not qualify, that does not mean that we cannot address your tax issues in another way including an individual offer in compromise.