Offer in Compromise

You Have Tax Settlement Options

The IRS designated a specific office, Centralized Offer in Compromise (COIC), to process Offer in Compromise (OIC) applications exclusively. This department employs Offer Examiners who are responsible for calculating and negotiating on behalf of the IRS to determine the maximum amount of revenue that can be collected from the OIC applicant.

Offer ExaminerAn Offer in Compromise is a tax settlement made with the IRS to pay an agreed amount of money in order to satisfy your tax debt. Paying your debt in full by reaching a tax settlement with the IRS is very beneficial and can save taxpayers from continued headaches and IRS collection actions. By settling and paying the tax debt in full you can also save money by avoiding further penalties and interest. However the Offer in Compromise process can be complicated and time consuming during attempts to reach a tax settlement.

An Offer Examiner takes into account not only your current financial situation but also any future financial factors that may allow the taxpayer to pay off more of the debt. For example, if you are currently making a car payment of $300, this is an allowable expense. But if the car will be paid off in the next year they would consider the additional income for the months thereafter. This ‘additional income’ is included it in a complex formula used to determine an acceptable settlement amount according to the IRS.

After years of negotiating with the IRS the OMG Tax team knows what the COIC is looking for and if our clients have a strong enough case to apply for an Offer in Compromise. Many times an Installment Agreement may be a more viable option.

We specialize in finding an offer amount that does not impose a great burden on our clients and that is likely to be accepted by the IRS. If we believe you are eligible for this program we will take control of all IRS negotiations and all our effort will go in to securing you the best possible compromise.

An Offer in Compromise (OIC) allows taxpayers to settle their tax debt for less than they owe if they cannot afford to pay the tax debt in full or it will cause great financial hardship to do so. The IRS charges a non-refundable $150 application fee to submit an OIC and requires an initial payment toward the tax liability.  It’s important to understand all of the factors that the IRS will consider when reviewing your offer.  You will have to submit a lot of financial information and it’s extremely important to send a complete application with all supporting financial documents.

It’s important to submit a reasonable and well calculated offer with a complete application package. This saves money in interest and penalties that still accrue during the application process. If the application is rejected the tax debt owed will counter productively be greater by the end of the OIC application.

Fresh StartAccording to the IRS, policy changes outlined in their Fresh Start initiative, will allow more taxpayers to qualify for an OIC.

The Offer Examiner calculates the applicant’s monthly income and deducts allowable living expenses (according to the National Standard.) Then they multiply the difference by 48, if you will pay off the balance in 6months, or 60, if you plan to pay off the debt over a longer period of time.  The product is added to the quick sale value of your personal assets. To determine the quick sale value of your assets you should determine the Fair Market Value (consult local vendors, websites etc.) and reduce this number by 20%.

This is the dollar amount may be accepted by the IRS as an Offer in Compromise, if they are willing to accept an offer at all. In past years offers have only been accepted 34% of the time.

However, as part of the IRS’s Fresh Start initiative, Offer in Compromise rules will be less rigid to allow more taxpayers to qualify for an OIC.

Typically approval can take between 3-9 months depending on the case and the amount of debt. Two years is the absolute longest that they can take. Once your offer has been sent to the IRS they will send you a notice with the date it was received. From the received date the IRS has two years to make a decision on your case. During this time they may want to revise the offer, request additional information and often wait to see if your financial situation is likely to change. If they have not officially accepted or rejected your offer after two years, the file is automatically considered accepted.

If they reject the offer within two years you may appeal the decision which sends your file to another office, the appeals office, where they review the entire case, usually taking no more than a year.  Often times the appeals office will approve a file that the COIC unit has rejected.

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