Offer in Compromise

Understanding the Offer In Compromise Program

Have you ever wished you could settle your tax debt for less than you owe? If you have thought about this before, the answer is—it’s possible. However, settling tax debt for much less than you owe isn’t always easy. But there is a way and it’s through an Offer in Compromise. In other words, you make an offer with the IRS to compromise on your tax debt and pay less. While it is possible to get approved for this Offer, it doesn’t happen all the time. For instance, if the IRS believes you can pay what you owe, you may not qualify. Alternatively, if you can prove that paying would cause you financial hardship, you may qualify. There’s no guarantee when applying for an OIC. But at FinishLine Tax Solutions, we offer the tax relief services you need to pay back less than you owe.

What is An Offer in Compromise?

An Offer in Compromise deal, or OIC, is almost exactly like it sounds. You, the taxpayer, make an offer to the IRS to compromise on your tax debt. The goal is to come up with an amount that you can affordably pay back. However, the IRS doesn’t just come up with this OIC number arbitrarily. Instead, the IRS will take a variety of measures to ensure a taxpayer qualifies for an OIC. For that reason, it’s very beneficial to work with a tax resolution services company when applying for an OIC. A tax relief professional will understand what’s required to get approved for this program. While a tax relief professional can negotiate with the IRS on your behalf, it’s possible to engage in negotiations independently. However, due to the intimidating nature of the IRS and the complexity of tax rules, navigating this process on your own is not advisable.

How Does This Program Work?

An OIC is for taxpayers who have a debt they cannot pay back. In other words, the taxpayer can pay back their tax debt for less than the full amount owed. However, before a taxpayer considers applying for an OIC, there are a couple things they should know. First, not everyone will qualify for an Offer in Compromise. In other words, if a taxpayer is able to pay back taxes, they should first explore other payment options. Second, the taxpayer should be in good standing with the IRS. For example, if the taxpayer hasn’t filed tax returns in a while, they should wait to apply for an OIC. Additionally, taxpayers should make sure they’re up to date with tax returns before seeking any tax relief services. The IRS is not likely to approve an OIC if the taxpayer has not been compliant with recent taxes.

Should I Consider This Program?

If you owe more tax debt than you can afford to pay back, you can consider an Offer in Compromise. However, it’s beneficial to consult with a tax relief services company before you consider applying for an OIC. This is because the application for this Compromise program can be somewhat tricky. Likewise, if the IRS finds something amiss in your application, they could immediately deny it. For that reason, it’s beneficial to consult with a tax relief services company as you’re applying for an Offer in Compromise. However, if your tax debt is causing you considerable economic hardship, an OIC could be a good option. When you’re ready, the professionals at FinishLine Tax Solutions can help you apply for this Compromise Offer provided by the IRS. We’ll determine if you qualify, and help you apply to guarantee you get the best outcome.

Is This Program A Good Idea?

Applying for an OIC can be a good idea if you owe more in taxes than you can pay. However, not all taxpayers will be approved for this program. According to Credit Karma, the IRS received 62,000 OIC applications in 2017. However, the IRS accepted only 25,000 Offer in Compromise applications or roughly 40 percent. The reason not all are accepted for an OIC is likely because the requirements can be somewhat strict. If everyone could settle their tax debt for less, they would. But, the IRS’s goal is also to collect the money they’re owed. So, they aren’t just going to let every taxpayer who applies pay back their taxes for less. However, if you can prove that you are physically unable to pay, you may qualify. Therefore, if you feel an Offer in Compromise is you’re only way out of tax debt, call us today.

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Scott A.

“You guys are just awesome. I didn’t really expect much more than a payment plan I could afford… But you guys got my debt reduced to less than $3000 and I started out with over $25,000. I still can’t believe I have this nightmare behind me. I am so thankful.”

Source: Yelp

How Does the IRS Approve OIC Applications?

Aside from the above requirements we mentioned, there are also other criteria the IRS uses. However, it should be noted that the IRS does not publicize how they determine who gets approved for an Offer in Compromise. But there are certain criteria it uses to determine if a taxpayer should qualify for an OIC. Therefore, here are a few situations in which the IRS will issue an approval for an Offer in Compromise:

  • Doubt as to liability: If a genuine dispute exists about the amount you owe, or whether you owe anything.
  • Doubt as to collectability: If your assets and income are less than the amount you owe. In that case, the IRS will determine your tax debt may not be collectible.
  • Effective tax administration: If paying in full would cause financial hardship. The IRS may also find it unfair to collect the amount based on special circumstances.

How Long Does it Take to Get an OIC Accepted?

As with most tax relief services, it can take some time for the IRS to respond to your OIC request. However, the time it takes to get an OIC approved depends on your individual tax situation. In 2017, the average time for an Offer in Compromise was four to nine months. However, some more complex OIC deals can take up to two years to get resolved. The individuals for whom it takes more than a year are often business owners or self-employed individuals. In other words, it’s typically rare for an Offer in Compromise deal to stretch beyond a year.

How Does the IRS Determine the Offer Amount?

Before the IRS confirms an offer, the taxpayer will first make an offer to the IRS. In this case, it’s helpful to work with a tax resolution services firm. This is because a tax relief professional can help you make an offer that’s more likely to get approved. In other words, you can’t just offer any amount you wish as a settlement for your debt. In contrast, the IRS will usually expect your offer to be equal or greater than the value of your assets. The value of your assets includes:

  • Real property
  • Vehicles
  • Bank accounts
  • Anticipated future income

The IRS will then take the figure above and subtract basic living expenses. As a result, the idea is the IRS comes up with a number that’s reasonable for you to pay back. In other words, the IRS considers this your “reasonable collection potential.”

Is It Difficult To Get Approved for an OIC?

As we mentioned above, not everyone will get approved for an OIC. However, if you feel you have good reason to qualify, you may get approved. The first step is to consult with a tax resolution services professional. A tax relief expert can advise you on applying for an OIC. Additionally, a tax relief professional can help you better understand if you qualify for an Offer in Compromise. In order to apply for an OIC, you will have to complete and submit Form 433-A. This form helps the IRS get a better understanding of your financial situation, including your assets and expenses. For that reason, it’s extremely helpful to work with a tax relief expert when filling out this application.

When it comes to figuring out the offer you will make to the IRS, there’s often complicated math involved. Therefore, it’s best to consult with a tax expert before you begin.

How Do I Negotiate This Offer?

Taxpayers often wonder if they can negotiate an Offer in Compromise with the IRS on their own. The short answer is yes, taxpayers can negotiate on their own. However, you won’t always get the best outcome this way. Alternatively, working with a tax resolution specialist will help you put your best foot forward when negotiating with the IRS. A tax relief expert will help you understand your individual tax situation. Additionally, a tax resolution expert will help you make an offer to the IRS. In contrast, there is a risk involved with making an offer on your own. For example, you may make an offer that’s too low and the IRS could disregard your application. If that happens, it might be your only chance to apply for this offer.

Can I Settle with the IRS?

It is possible for taxpayers to settle with the IRS themselves. There’s no reason why a taxpayer cannot communicate directly with the IRS. However, tax rules are complicated and the IRS can be intimidating. Therefore, it’s a much better idea to work with a tax attorney or tax relief specialists. Likewise, tax professionals can help you understand if you qualify for an Offer in Compromise in the first place. In the event they find you may not qualify, there are other tax relief services you can try. For example, you can apply for an installment agreement, where you make affordable payments to the IRS.

Additionally, you can apply for penalty abatement, in which the IRS will remove some penalties from your account. The point is, there are many options out there for taxpayers who need to settle back taxes. Call us today and we’ll find the right one for you.

How Much Should You Offer in an OIC?

When applying for an Offer in Compromise, you want to try and make a realistic offer. For that reason, it’s helpful to work with a tax relief professional. Similarly, a tax relief professional will have a better understanding of your tax situation. Here are a few steps the IRS uses to determine an OIC offer:

  • First, the IRS will determine how much they think you can pay.
  • Next, the IRS will figure out what your monthly living expenses are. These monthly living expenses including housing, utilities, car payment, food/clothing, and others.
  • Lastly, the IRS will take your income and subtract your allowable living expenses. As a result, the IRS can determine your OIC settlement value.

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What if I Still Can’t Pay the OIC Settlement?

The IRS will determine whether you can pay the IRS the settlement within five months after acceptance. If you can pay it in five months, the IRS will multiply your cash flow by 12. For example, if your cash flow minus expenses is $200, your settlement would be $2,400. However, if you cannot pay the settlement in five months, the IRS will let you pay in 24 months. Instead, the IRS will multiple your cash flow by 24. Therefore, your settlement would increase to $4,800. In other words, the IRS gives you a discount for paying back taxes sooner.

Ready to Apply for an OIC? Call FinishLine Tax Solutions

If you’re ready to settle your tax debt for good, call the professionals at FinishLine Tax Solutions. We have years of experience helping our clients settle their tax debts for less. Likewise, we can help you navigate the tricky terrain of applying for an Offer in Compromise deal. Additionally, we promise that we won’t stop fighting the IRS until you’re back in good financial standing. Our goal is to make sure you get the best outcome possible. We’ll also be here every step of the way. Call us today to get started on your road to financial freedom. Our tax relief services will take you to the finish line.


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