Offer in Compromise IRS Payment

If you owe money to the IRS, you may be able to obtain an Offer in Compromise (OIC) to pay the money that you owe. An OIC provides a way to have a large portion of your tax debt forgiven.  You must agree to pay a smaller amount in a timely fashion.  Both the amount and the time are agreed upon by both you and the IRS. You may be able to obtain an OIC if you believe the IRS is incorrect as to the amount of taxes you owe or if you are unable to pay back the full amount owed. In the second instance, the IRS will carefully consider the amount owed, your income, your assets, and your living expenses.  

An OIC is quite difficult to obtain; only about 1% of offers submitted to the IRS are accepted. However, in 2012, the IRS expanded its Fresh Start initiative which means that more people will qualify for Offers in Compromise.  Many taxpayers and tax professionals are unaware of these changes to the program as well. Some of the changes made include:

  • Changing the calculation to determine a taxpayer’s future income
  • Expanding the qualified amounts and types for Allowable Living Expenses
  • Making provisions for the repayment of student loans
  • Making provisions for the repayment of state and local taxes

The Sarasota law firm of Koontz & Associates, PL will help you determine if you are eligible for an OIC, and can help craft a persuasive argument regarding your eligibility for presentation to the IRS.

Three Types of Offers in Compromise Provide Certain Advantages and Disadvantages

There are three different types of OICs.  The one for which you qualify is largely dependent upon your income and assets and the amount you owe. No matter how much you owe the IRS, the amount to be paid is determined by a preset formula. Different options include:

  • Cash Offer
  • Short Term Deferred Offer
  • Long Term Deferred Offer

Though the amount considered will differ for the type of OIC, each will involve values that include the “quick sale value” of your assets, as well as the amount that the IRS could collect from your available income. The calculations are complicated and easily misunderstood without experience in this area of tax law. Be wary of companies that claim to be able to submit an OIC on your behalf.  Be especially cautious of companies who make extreme claims of settlement and have no attorneys or CPAs employed with their company. In recent years, there have been an increased number of scams and frauds.  For reduced risk, be certain to work with an experienced and licensed tax attorney or CPA.

Jo Ann Koontz

joann@koontzassociates.com 941-225-2615