Tax Compromise
What is Tax Compromise?
Tax compromise is also known as an offer in compromise (OIC). An OIC is a program offered by the IRS to taxpayers who are unable to pay their tax debt. Those who qualify are allowed to make an offer in compromise, which is an offer to pay a lesser amount than that which is owed. The offer in compromise program is intended to allow taxpayers with substantial back taxes to settle their tax debt and start over with a clean slate, so that they can remain current on their taxes in the future.
What Is The “Fresh Start” initiative
The Internal Revenue Service announced an expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.
Can I Get A Tax Compromise?
If you are an individual or business taxpayer that does not have the income, assets, or means to pay your tax liability now or in the foreseeable future, you may be a candidate. The Offer in Compromise program allows you to offer a lesser amount for payment of a non-disputed final tax liability.Generally, we approve an Offer in Compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.Although we evaluate each case based on its own unique set of facts and circumstances, we give the following factors strong consideration:
- The taxpayer’s ability to pay.
- The amount of equity in the taxpayer’s assets.
- The taxpayer’s present and future income.
- The taxpayer’s present and future expenses.
- The potential for changed circumstances.
- Whether the offer is in the best interest of the state.
How Long Does It Take To Get An OIC?
It will take one to two years to complete the Offer in Compromise process. The time line for an Offer in Compromise looks like this:
- Preparing the Offer in Compromise forms and backup documentation (1-4 months)
- IRS Processing of your Offer in Compromise (13-18 months)
- Finalizing the Offer and Making Payment Arrangements (1-3 months)
Based on the latest statistics, the IRS takes an average of 380 days to process an Offer in Compromise application. Your processing time may be shorter or longer than this.
What if I don’t qualify for an Offer in Compromise?
If you don’t qualify for an Offer in Compromise, you should consider setting up an installment agreement to pay off your tax debts. You will need an experienced IRS negotiator to help with other payment options.