What is Offer in Compromise? (OIC)

There may be times when you’re unable to pay your taxes in full. But don’t be fearful if you find yourself in this situation. If the IRS imposes a Notice of Tax Levy (seizing of your assets) against you, there are various methods available to you to prevent the seizure of your assets.

An offer in compromise (OIC) is an arrangement between the IRS and you, the taxpayer. It resolves your tax liabilities for less than the entire amount that is actually owed. However, if you can fully pay the liabilities owed through an Installment Agreement or other means, then generally you won’t qualify for an OIC. To qualify for an OIC, you must:

  • File all tax returns
  • Make all essential calculated tax payments for the current year
  • Make all essential federal tax deposits for the present quarter if you are a business owner with workers.

Below are some of the reasons why the IRS may accept an OIC:

  • If there is doubt as to liability: There has to be a genuine dispute as to the existence or amount of the correct tax debt under the law.
  • If there is doubt as to the collect-ability: This exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability owed.
  • Based on effective tax administration: When the tax is legally owed and the full amount owed can be collected, but paying in full would either cause a financial burden or would be unfair and biased because of unusual circumstances.
  • If the taxpayer offers to pay an amount equal to or greater than the Reasonable Collection Potential (RCP).

If you’re still uncertain about how you can prevent seizure of your assets, give us a call. Our tax consultants will be happy to assist you. Contact us now.