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Back Taxes
An Offer in Compromise is an agreement between the IRS and the taxpayer that settles a tax
liability for payment of less than the full amount owed. It was designed by Congress and
integrated by the IRS in 1992; authorizing the IRS to settle for less than what is owed in certain
circumstances.
The goal of the IRS is to settle, and therefore eliminate costly accounts that cannot be
collected on, at the earliest possible time and at the least cost to the government. In many
cases an O.I.C. will put a taxpayer back in the system, who has not had the ability to "catch up"
creating a fresh start and future compliance.
The circumstances that would allow the IRS to accept an Offer in Compromise are:
1. Doubt to Liability - This means that doubt exists that the tax amount assessed is correct.
2. Doubt to Collectibility - Doubt exists that you could ever pay the full amount.
3. Effective Tax Administration - The taxpayer has no doubt the tax liability exists and there is
no doubt that the full amount could be collected, but an exceptional circumstance exists that
would allow the IRS to consider your offer. It must be determined that the collection of the full
amount of tax would create economic hardship or would be unfair and inequitable.
There are 3 payment plans that can be used with an Offer in Compromise:
1. Cash - (90 days or less)
2. Short Term Deferred Payment - (more than 90 days and up to 24 months.
3. Deferred Payment - (payment terms are over the remaining statutory period for collection of
the tax).
Notice: As of November 1, 2003, the IRS will be charging a $150 processing fee for all offers in
compromise.
All Offers are filed in either Tennessee or New York. While the Offer is being considered, the
IRS must stop their collection action including levying any assets or wage garnishments.
The IRS statistics show that 75% of all offers are returned at the beginning due to the forms
being filled out incorrectly or information not being provided. Of the remaining 25% of the
Offers that make it past being a "processable offer" 10% of those are rejected for various
reasons known only to the IRS. Most taxpayers overstate their income and assets, thereby
allowing the IRS to reject the Offer completely, or to ask a much higher offer than would be
necessary, if the taxpayer had an experienced tax professional on their side. This is where our
years of experience, expertise and success can work to your advantage.
liability for payment of less than the full amount owed. It was designed by Congress and
integrated by the IRS in 1992; authorizing the IRS to settle for less than what is owed in certain
circumstances.
The goal of the IRS is to settle, and therefore eliminate costly accounts that cannot be
collected on, at the earliest possible time and at the least cost to the government. In many
cases an O.I.C. will put a taxpayer back in the system, who has not had the ability to "catch up"
creating a fresh start and future compliance.
The circumstances that would allow the IRS to accept an Offer in Compromise are:
1. Doubt to Liability - This means that doubt exists that the tax amount assessed is correct.
2. Doubt to Collectibility - Doubt exists that you could ever pay the full amount.
3. Effective Tax Administration - The taxpayer has no doubt the tax liability exists and there is
no doubt that the full amount could be collected, but an exceptional circumstance exists that
would allow the IRS to consider your offer. It must be determined that the collection of the full
amount of tax would create economic hardship or would be unfair and inequitable.
There are 3 payment plans that can be used with an Offer in Compromise:
1. Cash - (90 days or less)
2. Short Term Deferred Payment - (more than 90 days and up to 24 months.
3. Deferred Payment - (payment terms are over the remaining statutory period for collection of
the tax).
Notice: As of November 1, 2003, the IRS will be charging a $150 processing fee for all offers in
compromise.
All Offers are filed in either Tennessee or New York. While the Offer is being considered, the
IRS must stop their collection action including levying any assets or wage garnishments.
The IRS statistics show that 75% of all offers are returned at the beginning due to the forms
being filled out incorrectly or information not being provided. Of the remaining 25% of the
Offers that make it past being a "processable offer" 10% of those are rejected for various
reasons known only to the IRS. Most taxpayers overstate their income and assets, thereby
allowing the IRS to reject the Offer completely, or to ask a much higher offer than would be
necessary, if the taxpayer had an experienced tax professional on their side. This is where our
years of experience, expertise and success can work to your advantage.
The 10 most important things you need to know about Offers in Compromise
In order to qualify to file an OIC, you must have filed all of the tax returns you are required to
The settlement procedures depend on how much is collectible from you. It has nothing to do
with how much you owe to the IRS . For example, a $4 million tax liability could be settled for
$1,000 if you are only collectible for $1,000.
For collectibility, the IRS looks at both assets and income.
In analyzing income, the IRS is required to allow you to offset your income with reasonable
and necessary living expenses (e.g., housing, food, transportation, heath care, court ordered
payments, child care, etc.).
The IRS will discount assets to their “quick sale” value. In the case of real estate, cars and
other fixed assets, the IRS discount is at least 20% in almost all cases.
If you disagree with an IRS determination by an Offer Specialist, the offer can be appealed to
an IRS Office of Appeals. The appeal conference is informal.
If the IRS is actively pursuing a collection action against you (either a levy, lien or garnishment
of wages) , you can appeal that collection action in what is called a Collection Due Process
Appeal. During that Appeal hearing, you can offer an Offer in Compromise or an Installment
Agreement as an alternative to the collection action.
All tax liabilities of individuals and corporations can be compromised, including payroll tax
liabilities and tax liabilities for tax fraud, and any tax liability not dischargeable in bankruptcy.
The Congress requires the IRS to have a “liberal acceptance” policy for offers in
compromise. The legislative tax policy for offers-in-compromise is to give taxpayers a “fresh
start.” The IRS adopts that tax policy.
A tax liability can be settled, even if you are collectible for the full amount of that tax liability, if
you can demonstrate “special circumstances” for those assets or income. This can be done
if the settlement is important for “effective tax administration."
In order to qualify to file an OIC, you must have filed all of the tax returns you are required to
The settlement procedures depend on how much is collectible from you. It has nothing to do
with how much you owe to the IRS . For example, a $4 million tax liability could be settled for
$1,000 if you are only collectible for $1,000.
For collectibility, the IRS looks at both assets and income.
In analyzing income, the IRS is required to allow you to offset your income with reasonable
and necessary living expenses (e.g., housing, food, transportation, heath care, court ordered
payments, child care, etc.).
The IRS will discount assets to their “quick sale” value. In the case of real estate, cars and
other fixed assets, the IRS discount is at least 20% in almost all cases.
If you disagree with an IRS determination by an Offer Specialist, the offer can be appealed to
an IRS Office of Appeals. The appeal conference is informal.
If the IRS is actively pursuing a collection action against you (either a levy, lien or garnishment
of wages) , you can appeal that collection action in what is called a Collection Due Process
Appeal. During that Appeal hearing, you can offer an Offer in Compromise or an Installment
Agreement as an alternative to the collection action.
All tax liabilities of individuals and corporations can be compromised, including payroll tax
liabilities and tax liabilities for tax fraud, and any tax liability not dischargeable in bankruptcy.
The Congress requires the IRS to have a “liberal acceptance” policy for offers in
compromise. The legislative tax policy for offers-in-compromise is to give taxpayers a “fresh
start.” The IRS adopts that tax policy.
A tax liability can be settled, even if you are collectible for the full amount of that tax liability, if
you can demonstrate “special circumstances” for those assets or income. This can be done
if the settlement is important for “effective tax administration."
Taxes / Relief
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