IRS Offers in Compromise ("OIC") - An Offer in Compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS can legally compromise a tax debt with the taxpayer for any of the following reasons:
It is doubtful as to whether the tax assessed to the taxpayer tax is correct.
It is doubtful as to whether the taxpayer could ever pay the full amount of tax owed.
Effective Tax Administration - There is no doubt that the taxpayer owes the tax or that it could be collected from the taxpayer, but the IRS finds that an exceptional circumstance exists that allows the IRS to consider a taxpayer's Offer in Compromise. In order to be found eligible for a compromise under the Effective Tax Administration reason, the taxpayer must demonstrate that in collecting the tax would be unfair and inequitable, or that the taxpayer would suffer an economic hardship.
Taxpayers should beware of promoters' claims that tax debts can be settled for "pennies on the dollar" through the Offer in Compromise Program. Check the OIC requirements to see if an offer in compromise is right for you.
A successful Offer in Compromise can provide the taxpayer with such significant benefits as:
- Delay in collections efforts - the IRS will typically place "holds" on collections efforts while the OIC is being considered;
- Release of Tax Liens - the tax liens will be released once an OIC is agreed to by both the IRS and taxpayer and successfully completed by the taxpayer; and
- Avoid Bankruptcy - in many cases, an OIC can allow the taxpayer to stay out of bankruptcy and even reduce tax liabilities that might not have otherwise been dischargable in bankruptcy.
There are also downsides or potential negative consequences of the Offer in Compromise Process. Some potential downsides or potential negative consequences include but are not limited to:
- Full Financial Disclosure - the taxpayer must make a full financial disclosure to the government;
- Certain rights or benefits usually or otherwise available to the taxpayer might be waived if the OIC is accepted; and
- A Federal OIC does not resolve state or municipal taxes or any other debts
In accepting an OIC, the IRS typically requires that the taxpayer remain current on all tax obligations for a period of five (5) years. In turn, this means that the IRS has the right to and might revoke the OIC should the taxpayer default upon the terms of the OIC or fail to later pay then current, future or other income taxes.
At Bell Law, LLC, we will remain at your side and provide aggressive advocacy until your tax law issue is resolved. Protect your rights with the help of an attorney who will look at all options available to you. Contact us at 773-696-5087 or toll free at 888-574-7062.
Contact Us
For more information or to schedule an appointment with an experienced tax lawyer, please contact us. We assist with preparation and filing of IRS Code sections 501(c)(3) applications for charitable and not-for-profit organizations.
