Do I Qualify for an IRS Offer in Compromise?

An IRS Offer in Compromise (OIC) is a program allowing eligible taxpayers to settle their tax debts for less than the full amount owed. However, qualifying for an OIC is stringent. This article provides an exhaustive overview of qualifications, processes, and tips for success.

Understanding the Offer in Compromise Program

The OIC program was established to provide relief to taxpayers who cannot pay their full tax liability or doing so would create a financial hardship. The IRS only accepts offers when it believes the offered amount is the most it can expect to collect within a reasonable period.

Eligibility Criteria

According to the IRS (IRS Offer in Compromise), you must meet certain criteria to be considered:

• Inability to Pay: You must demonstrate that you cannot pay the full tax liability.
• Refund Returns: All required tax returns must have been filed.
• Estimated Payments: Unless you are a wage earner, your estimated tax payments for the current year must be paid.
• Current Status: You cannot be in an open bankruptcy proceeding.

Types of Offers

The IRS evaluates offers based on three grounds (Offer in Compromise Fact Sheet):

• Doubt as to Collectibility: You can demonstrate that the IRS cannot expect to collect more than you offer due to your financial situation.
• Doubt as to Liability: There is a legitimate dispute over the amount of your tax debt.
• Effective Tax Administration: You can pay the debt in full, but payment would cause excessive economic hardship.

Steps to Apply for an Offer in Compromise

Applying for an OIC requires diligence and careful preparation. Here are actionable steps:

Step 1: Complete the Pre-Qualifier Tool

The IRS offers an Online Pre-Qualifier Tool to determine if you may be eligible for an OIC.

Step 2: Gather Required Documentation

You’ll need:

• Form 433-A (OIC) for individuals or 433-B (OIC) for businesses.
• Form 656, Offer in Compromise.
• Financial documentation, including bank statements, asset records, and proof of income.

Step 3: Submit Your Application

Include the application fee and initial payment with Forms 433 and 656 to the IRS. For more information on fees, refer to the IRS Fee Chart.

Step 4: Respond to IRS Requests

If the IRS needs more information, respond promptly to avoid delays or rejection.

Actionable Tips for Success

• Maintain monthly payments while your offer is under review.
• Consult a tax professional to enhance the accuracy and completeness of your application.
• Ensure all submitted documents are accurate and up-to-date.

Conclusion

The IRS Offer in Compromise program provides a lifeline to those unable to meet their tax liabilities. By understanding the requirements and following the application steps meticulously, you increase your chances of a successful offer. For personalized advice, consult a tax professional.

For professional assistance, visit our dashboard for dedicated support and guidance.