In certain circumstances, the Internal Revenue Service (IRS) allows you to pay less than the full amount you owe through an offer in compromise (OIC) agreement. This process begins by submitting the OIC request (Form 656) along with any supporting financial statements depending upon the circumstances.
The IRS accepts OIC agreements for a number of reasons, including:
- There is doubt about the amount you owe (or whether you owe it).
- There is doubt as to whether you can pay the amount you owe based on your financial situation.
- An economic hardship would result if you had to pay the full amount owed.
- Your case presents compelling reasons that the IRS determines are a sufficient basis for compromise.
The IRS will accept an offer if it is the maximum amount that you can reasonably afford to pay. This is known as your “reasonable collection potential.”
The IRS typically will delay collection activities and will not levy your property to settle a tax bill while it reviews an offer in compromise request or during an OIC appeal.
At the law firm of Michael T Napolitano, we help our clients minimize the amount of back taxes owed to the IRS through an OIC agreement. It is important to involve us as early in the process as possible so we can evaluate your assets to determine if you qualify for an OIC and to assist you in filing Form 656.
The IRS provides three options for paying the amount due under an OIC agreement: a lump sum cash offer payable in 10, 30, 60, or 90 days from written notice of acceptance of the offer; a short-term payment plan of 24 months or less; and a deferred payment offer where the offer amount will be paid over the remaining life of the collection statute. An OIC submitted as a lump-sum cash offer, must include the $150 application fee and a non-refundable payment of 20 percent of the offered amount, with the balance to be paid in no more than five installments from the notice of acceptance.
If your OIC proposal is rejected, you have 30 days to ask the appeals office of the IRS to reconsider your offer. Our experienced Cranston tax attorney has helped clients reverse an initial denial of an OIC by collecting financial records and submitting a more complete application.
Don’t let tax debt go unresolved, and don’t pay more to the IRS than you have to. We can review your situation and provide you with a straightforward assessment of what you might expect. Call 800-626-0608 or use our contact form to schedule an appointment with our knowledgeable OIC lawyer.