What is an IRS Offer in Compromise (OIC)?

An Offer in Compromise (OIC) is a program administered by the Internal Revenue Service (IRS) that allows taxpayers to settle their tax debt for less than the full amount they owe. The program is designed to provide a way for taxpayers who are unable to pay their tax debt in full to resolve their tax problems and become compliant with their tax obligations.

To qualify for an OIC, a taxpayer must demonstrate that they are unable to pay their tax debt in full, and that the amount offered in compromise is the most the IRS can expect to collect within a reasonable period of time. The IRS will consider a taxpayer's income, expenses and assets when determining their eligibility for an OIC.

There are two types of OIC: a lump-sum cash offer and a short-term payment plan offer.

1. Lump-sum cash offer: Under this option, a taxpayer makes a one-time payment to the IRS in exchange for the IRS agreeing to forgive the remaining balance of the tax debt. This option is typically for those taxpayers who are able to make a lump-sum payment and want to resolve their tax debt quickly.

2. Short-term payment plan offer: Under this option, a taxpayer agrees to pay the IRS a certain amount of money over a period of time in exchange for the IRS agreeing to forgive the remaining balance of the tax debt. This option is typically for those taxpayers who are unable to make a lump-sum payment and want to pay off their tax debt over time.

It's important to note that the IRS acceptance rate for OIC is relatively low, and the process can be complicated and time-consuming. Submitting a complete and accurate offer package is crucial, including a detailed financial statement and supporting documentation. The IRS will review the offer and make a determination on whether to accept or reject it. In some cases, the IRS may counter with a different offer.

Additionally, while the OIC process is pending, the taxpayer is required to be compliant with their current tax obligations and file all required tax returns. Furthermore, the taxpayer can't have any unfiled tax returns and must be current on estimated tax payments for the current year.

In conclusion, an Offer in Compromise (OIC) is a program administered by the Internal Revenue Service (IRS) that allows taxpayers to settle their tax debt for less than the full amount they owe. The program is designed to provide a way for taxpayers who are unable to pay their tax debt in full to resolve their tax problems and become compliant with their tax obligations. To qualify for an OIC, a taxpayer must demonstrate that they are unable to pay their tax debt in full and the offered amount is the most the IRS can expect to collect within a reasonable period of time. It's important to note that the IRS acceptance rate for OIC is relatively low, and the process can be complicated and time-consuming, so it's recommended to seek professional help from a Tax attorney.