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Home (https://coastonetaxgroup.com/) » Tax Services (https://coastonetaxgroup.com/tax-services/) » Offer in
Compromise

Offer in Compromise

Offer in Compromise is an agreement between a taxpayer and the Internal Revenue Service. Commonly
referred to as an OIC, it settles a taxpayer’s tax liabilities for less than the full amount owed. In most
cases, taxpayers who can fully pay their tax liabilities through an installment agreement or other means,
won’t qualify for an OIC. The IRS approves an OIC application when the amount being offered by a
taxpayer is the most the IRS can expect to collect within a certain window of time. While an OIC may
seem like a logical option for struggling taxpayers, it is important to weigh the costs and risks associated
with the application processes before making a decision. Here are three scenarios under which the IRS
accepts Offer in Compromise requests:

Doubt as to Liability: The taxpayer believes the amount of tax assessed is incorrect and wants to
dispute either part or all of the tax debt.

Doubt as to Collectibility: Considered to be the most common scenario, the person filing under
this category must demonstrate that he or she will likely never be able to pay the full tax obligation

due to financial hardship or some other compelling reason. The IRS will consider the following
set of facts and circumstances when reviewing an application:

The taxp(hatyteprs’s://scpoeacsiftiocnceitracuxgmrsotuapn.cceosma)nd financial situation;
The taxpayer’s ability to pay;
The taxpayer’s annual income;
The taxpayer’s other expenses; and
The taxpayer’s assets and equity in those assets.
Effective Tax Administration (ETA): Requests for tax relief under this scenario do not dispute the
amount of tax owed, and applicants cannot qualify for a Doubt as to Collectibility offer either. This
means that you own sufficient equity in assets to fully pay you tax liability, but due to special or
exceptional circumstances, liquidation of those assets would create an economic hardship. The
elderly and disabled taxpayers who are on fixed income often use this scenario.
If you’re interested in discovering whether or not you may qualify for an Offer in Compromise, you can
access the Offer in Compromise Pre-Qualifier (https://irs.treasury.gov/oic_pre_qualifier/) on the IRS
official website today. This allows you to begin planning your proposal now and move forward in this long
process.

The Application Process

Taxpayers who are eligible to apply for an Offer in Compromise must fill out the Form 656-B, Offer in
Compromise Booklet PDF (https://www.irs.gov/pub/irs-pdf/f656b.pdf) or Form 656-L, depending on
the reason for the OIC. These documents are available on the IRS’ website. The packet includes:

Form 433-A (OIC) for individuals
Form 433-B (OIC) for businesses, as well as a list of the required documentation.
Form 656(s) for individual and business tax debt (Corporation/ LLC/ Partnership)

These must be submitted on separate Form 656
A non-refundable application fee of $205
A non-refundable initial payment for each Form 656.
In regards to the non-refundable initial payment, taxpayers have two options to choose from**. These
include:

Lump Sum Cash: 20% of the total offer amount in your application. Once approved, taxpayers will
pay the remaining balance within five or fewer payments.
Periodic Payment: After submitting a proposed initial payment, taxpayers are responsible for
paying the remaining balance in monthly installments while the IRS processes their offer. Once
accepted, they continue to pay the remaining balance in monthly installments. This process is
usually completed within a 24 month period and/or 6 or more monthly payments.
** If you fall under the Low Income certification guidelines, you are not required to pay application fees,
initial payments, or monthly installments while your OIC application is being evaluated.

Once You’ve Applied

As you wait for the IRS to either approve or deny your application, you are still responsible for
making payments towards your tax liability. Other things to expect include the following:

Non-refundable payments are applied to your due taxes. You still have the option to apply these
payments to a specific tax year or debt.

IRS collection activities and seizure of assets will be suspended temporarily.
Legal assessment and the collection period for your tax filings will be extended.
You are respo(nhstitbplse:/f/ocromasatkoinnegtaaxllgdruoeupp.acyomme)nts; however, you are not responsible for making
payments on other installment agreements.
Your case may become public record and become documented via a Notice of Federal Tax Lien.
If the IRS fails to make a determination within 2 years of its receipt date, your offer will be
automatically accepted.

Has Your Application Has Been Approved/Denied?

If an OIC application has been accepted, the taxpayer will then be required to file all required tax returns
timely and make payments detailed in Section 7 of Form 656. Any refunds received during the calendar
year in which an offer was accepted will be applied to their tax liability.
If an offer is rejected, taxpayers can make an official appeal within 30 days through a Request for Appeal
of Offer in Compromise, Form 13711 PDF (https://www.irs.gov/pub/irs-pdf/f13711.pdf).

What Coast One Tax Group Can Do For You:
An Offer in Compromise involves significant amounts of paperwork, while the IRS’ processing times can
be extremely lengthy. However, the Fresh Start program was instituted in 2011 and can provide taxpayers
with additional relief and a more streamlined process under certain conditions. The ultimate goal with an
OIC is to achieve a compromise that suits the best interests of both the taxpayer and the IRS. To be
considered, you must first make an appropriate offer based on what the IRS considers to be your true
ability to pay.

We understand that Offer in Compromises have a very low acceptance rate, and you may want to
consider hiring a professional to help your chances of success if you feel that you may qualify. The team
at Coast One is proud to have a 2018 track record of saving clients 92% or more on their back taxes
when negotiating an Offer in Compromise. Give us a call today for a free consultation to see if you
qualify. We promise to work with you to create the strongest case possible, and to also defend your case
to the IRS. Our team understands how tax laws work and can provide expertise and keen attention to
detail that you won’t find elsewhere.

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Reply from Coast1Tax :
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