IRS Offer in Compromise
One of the most powerful tools available to taxpayers with exceptional circumstances facing federal tax debt with the Internal Revenue Service (IRS) is the IRS offer in compromise program (“OIC”). An OIC allows qualifying taxpayers facing financial hardship to settle federal tax debt (including income tax, back taxes, and current year taxes) with the IRS for less than the full amount. To qualify for an OIC, a taxpayer must demonstrate economic hardship by proving that the reasonable collection potential must be less than the total tax liability. The IRS determines reasonable collection potential by combining the taxpayer’s future income (a multiple of net monthly income) with the taxpayer’s net equity in assets. The taxpayer must also file all required tax returns to qualify for an OIC.
The OIC process begins by submitting an offer in compromise application, which generally includes the following:
- IRS form 656-B (compromise booklet)
- Collection information statement (IRS form 433-A and/or form 433-B)
- Supporting documentation (typically financial information for living expenses such as bank account statements)
- Application fee (waived for qualifying taxpayers under the low-income certification)
- Initial payment (can be made by lump sum or by period monthly payments)
When a processable OIC is submitted, the IRS must suspend most collection activity. However, the IRS may still file a tax lien while an OIC is pending. Once the OIC is processed and reviewed, the IRS will either accept the OIC, submit a counteroffer, or reject the OIC. If the IRS accepts an OIC, the tax debt is settled once the offer amount is paid full. If the IRS submits a counteroffer, the taxpayer can either accept the counteroffer or file an administrative appeal with the IRS to challenge the amount of the counteroffer.
If the IRS rejects an OIC, the taxpayer can file an administrative appeal with the IRS to challenge the rejection. If an appeal is not timely filed, the IRS will resume collection action unless the taxpayer enters into an installment agreement (payment plan) or other collections alternative. The IRS allows taxpayers to utilize an online offer in compromise pre-qualifier to determine eligibility for an OIC.
Successfully settling tax debt through the OIC process requires a thorough understanding of complex legal and regulatory rules, highlighted by the roughly 30% IRS OIC acceptance rate. We invite you to request a consultation with an experienced tax attorney if you need help navigating the OIC process.
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Results
We are committed to delivering results for our clients. We invite you to review a sample of Offer in Compromise cases that we have successfully resolved for our clients. All cases are different and the summaries below should not be interpreted as a prediction or guarantee of success or specific results.
$138,605 Federal Income Tax Debt Settled For $33,085
Taxpayer, who was self-employed, owed $138,605 in federal income tax debt to the IRS for multiple tax years. DeWitt Law determined that the Taxpayer could not fully pay the tax debt within the time remaining under the statute of limitations for IRS collections. DeWitt Law represented the Taxpayer before the IRS and submitted an Offer in Compromise proposing to settle the tax debt. The IRS erroneously rejected the Offer in…
$507,443.65 Tax Liability Reduced to $13,391.08
Taxpayer owed $507,443.65 in federal income tax debt to the IRS for multiple tax years. The IRS issued a Notice of Intent to Levy, threatening to garnish the Taxpayer’s wages and levy their bank accounts. DeWitt Law represented the Taxpayer before the IRS and filed a Collection Due Process request to resolve the tax debt and prevent further IRS collection action. The IRS Office of Appeals held a Collection Due…
$571,586 Tax Debt Settled for $29,297
Represented taxpayer who owed the IRS over $571,586. Tax debt was reduced to $29,297 through an accepted offer in compromise.
$2,100,000 Tax Debt Reduced to $7,417
Represented taxpayer who owed the IRS approximately $2,100,000. Tax debt was reduced to $7,417 through an accepted offer in compromise.
$505,027 Tax Debt Settled for $24,593
Tampa, Florida – Represented taxpayer who owed the IRS over $505,027. Tax debt was reduced to $24,593 through an accepted offer in compromise.
$1,300,000 Tax Debt Reduced to $4,614
Represented taxpayer who owed the IRS approximately $1,300,000. Tax debt was reduced to $4,614 through an accepted offer in compromise.
$307,815 Tax Debt Settled for $2,000
Orlando, Florida – Represented taxpayer who owed the IRS over $307,815. Tax debt was reduced to $2,000 through an accepted offer in compromise.
$266,755 Tax Debt Settled for $33,515
Represented taxpayer who owed the IRS over $266,755. Tax debt was reduced to $33,515 through an accepted offer in compromise.
$202,741 Tax Debt Settled for $3,927
Represented taxpayer who owed the IRS over $202,741. Tax debt was reduced to $3,927 through an accepted offer in compromise.
$58,650 Tax Debt Settled for $2,000
Memphis, Tennessee – Represented taxpayer who owed the IRS over $58,650. Tax debt was reduced to $2,000 through an accepted offer in compromise.
$131,672 Tax Debt Settled for $4,582
Represented taxpayer who owed the IRS over $131,672. Tax debt was reduced to $4,582 through an accepted offer in compromise.
$448,000 Tax Debt Settled for $10,000
Represented taxpayer who owed the IRS over $448,000. Tax debt was reduced by over 80% through an accepted offer in compromise.
$118,170 Tax Debt Settled for $27,204
Little Rock, Arkansas – Represented taxpayer who owed the IRS over $118,170. Tax debt was reduced to $27,204 through an accepted offer in compromise.
$94,616 Tax Debt Settled for $5,641
Represented taxpayer who owed the IRS over $94,616. Tax debt was reduced to $5,641 through an accepted offer in compromise.
$40,655 Tax Debt Settled for $5,581
Tampa, Florida – Represented taxpayer who owed the IRS over $40,655. Tax debt was reduced to $5,581 through an accepted offer in compromise.
$318,198 Tax Debt Settled for $2,000
Orlando, Florida – Represented taxpayer who owed the IRS over $318,198. Tax debt was reduced to $2,000 through an accepted offer in compromise.
$404,401 Tax Debt Reduced to $41,962
Represented self-employed taxpayer who owed the IRS approximately $404,401. The IRS rejected the taxpayer’s OIC claiming that the taxpayer had the ability to fully pay through installment payments. DeWitt Law filed an administrative appeal with the IRS and the OIC was accepted for $41,962.
$174,691 Tax Debt Settled for $62,004
Memphis, Tennessee – Represented taxpayer who owed the IRS over $174,691. Tax debt was reduced to $62,004 through an accepted offer in compromise.
$287,308 Tax Debt Settled for $78,483
Represented taxpayer who owed the IRS over $287,308. Tax debt was reduced to $78,483 through an accepted offer in compromise.
$93,265 Tax Debt Settled for $14,279
Represented taxpayer who owed the IRS over $93,265. Tax debt was reduced to $14,279 through an accepted offer in compromise.
$238,156 Tax Debt Settled for $11,089
Represented taxpayer who owed the IRS over $287,308. Tax debt was reduced to $11,089 through an accepted offer in compromise.
$313,821 Tax Debt Settled for $8,359
Represented taxpayer who owed the IRS over $313,821. Tax debt was reduced to $8,359 through an accepted offer in compromise.
$900,000 Tax Debt Reduced to $60,000
Represented taxpayer who owed the IRS approximately $900,000. Resulted in a recommended reduction of tax by the IRS of $60,000 through an Offer in Compromise.
$302,714 Tax Debt Settled for $14,451
Represented corporate taxpayer operating as a C-Corporation with a federal payroll tax liability of $302,714. Tax debt was reduced to $14,451 through an accepted OIC.
$121,370 Tax Debt Settled for $6,410
Represented taxpayer who owed the IRS over $121,370. Tax debt was reduced to $6,410 through an accepted offer in compromise.
$331,000 Tax Debt Settled for $63,264
Memphis, Tennessee – Represented taxpayer who owed the IRS over $331,000. Tax debt was reduced to $63,264 through an accepted offer in compromise.
