The offer in compromise (OIC) program is a viable tool to be considered, especially in a time of economic turmoil. The OIC is a way for the IRS to resolve legitimate disputes, collect funds that are unlikely to be collected otherwise, and handle special circumstances that are normally difficult to resolve. The ultimate goal of the program is a compromise that is in the best interest of the government as well as the taxpayer. For the government it settles a delinquent tax liability, while for the taxpayer it provides a fresh start toward future voluntary compliance with all filing and payment requirements.
On what grounds will the IRS accept an Offer in Compromise?
- Doubt as to liability - There must be a genuine doubt to the validity of the liability.
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Doubt as to collectibility - The taxpayer must demonstrate that (a) it is unlikely that the tax can be collected in full with the collection statute of limitations and (b) the OIC reasonably reflects the amount the IRS could collect through other means, including administrative collection remedies.
- Promotion of Effective Tax Administration - The IRS may compromise a tax liability on the ground if (a) full collection is possible but will cause the client an economic hardship; or (b) there are no other grounds of compromise, but public policy or equity considerations provide a sufficient basis for compromising the liability.
When submitting an Offer in Compromise it is important that you fully prepare and organize the information prepared. This includes complete, accurate and current financial information as well as any documents that might be relevant in having the OIC processed. A detailed factual statement as to your situation and the circumstances why you owe taxes should also be included.
To improve your chances of having an Offer in Compromise accepted, you should consider having a professional complete your application. Contact us to learn more about our services and how we can assist you.