IRS Issues New Guidance for Taxpayers Seeking Offers in Compromise

The Offer in Compromise (OIC) program provides an opportunity for eligible U.S. taxpayers to settle their outstanding tax debt for less than the full amount they owe. Recently, the Internal Revenue Service (IRS) published a series of videos explaining the OIC application process and warning of common scams involving the OIC program. In this article, US International Tax Advisors discusses some of the key aspects of the OIC program and offers some key insights for taxpayers who are interested in pursuing an offer in compromise.

Offer in Compromise Eligibility: Do You Qualify?

Not all U.S. taxpayers who are behind on their federal income tax liability qualify to submit an offer in compromise to the IRS. Rather, the IRS determines eligibility based on four primary criteria:

• Ability to pay
• Income
• Expenses
• Asset equity

As the IRS explains, “We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.” Before submitting an offer, the IRS encourages taxpayers to “[e]xplore all other payment options,” including entering into an installment agreement that allows for payment of the full amount owed over time. We provide a more in-depth look at the OIC eligibility criteria in How to Benefit from the IRS Offer in Compromise Program.

Applying for an Offer in Compromise with the IRS

There are two main forms used to apply for an offer in compromise with the IRS. These are Form 433 (433-A for individuals and 433-B for businesses) and Form 656. The IRS’ new video series provides guidance for completing these forms; however, the IRS also encourages U.S. taxpayers who are considering an offer in compromise to consult with a tax professional.

Avoiding Offer in Compromise Scams and “OIC Mills”

In addition to providing guidance for navigating the offer in compromise process, the IRS has also issued a warning for U.S. taxpayers to be wary of offer in compromise scams and “OIC mills.” As the IRS states, “Some companies routinely overstate how they can help with this program and clear up people's back taxes for pennies on the dollar . . .  and [they] mislead people who have no chance of meeting the requirements while charging excessive fees, often thousands of dollars.”

For taxpayers who are interested in learning more about submitting an offer in compromise to the IRS, the best way to avoid scams is to consult with a reputable Maryland tax lawyer. A reputable lawyer will provide a thorough assessment of your eligibility and how much you may be able to save, and will fully disclose his or her fees in advance. If you would like to know more about our OIC services and fees, we encourage you to contact us for a confidential consultation.  

Discuss Your Options with US International Tax Advisors

Do you qualify to submit an offer in compromise to the IRS? To find out, schedule an appointment with US International Tax Advisors. Call 844-796-8565or contact us confidentially online today.