Using an Offer in Compromise to Settle Tax Debt

Individuals who find themselves facing tax debt may be eligible to settle their debt with an Offer in Compromise. An Offer in Compromise allows qualified individuals with unpaid tax debt to negotiate with the IRS to come to a settled amount that is less than the total owed. OICs can be extremely beneficial in helping those who are struggling with tax issues, but they can be difficult to attain. In this blog, our Bloomfield tax attorney explains how an OIC can be used to settle tax debt.

Do you qualify?

It is simply not enough to show the IRS that you are willing to negotiate a settlement. In order to qualify for an Offer in Compromise, you must be able to show the IRS that there is “doubt as to collectability.” Under this condition, there is significant doubt as to whether the IRS will be able to collect your debt, both now and in the future. You can also qualify if you show the IRS that, because of exceptional circumstances, paying back your tax debt would not only be unfair, but would cause an economic hardship.

OIC Process

Submitting an Offer in Compromise is a formal process – to initiate the OIC, you must complete and file the necessary documentation. Part of the process includes disclosing detailed financial information, including pay stubs and bank records. When it comes time to submit your minimum offer amount, make sure that your offer is equal to the “net realizable value” of your assets, plus the monthly income you have left after subtracting your monthly expenses. If, for whatever reason, the IRS cannot accept your offer, you’ll receive written explanation. The IRS usually rejects an offer for one of two reasons: because the offer was too low or you’ve been convicted of a serious crime. In the explanation, the IRS will state an amount they will accept as an OIC.

Tax issues can happen to anyone. Our Bloomfield tax lawyer has extensive experience helping clients with tax solutions that are efficient and reliable. To schedule a free consultation, call (248) 919-8029 today!