Using Offers in Compromise to Settle A Tax Debt

The Offer in Compromise (or OIC) program is an IRS program which allows any qualified individual or business with an unpaid tax liability to negotiate a settlement for an amount that is less that the total owed to clear the debt. It is in the best interest of the individual or business and the IRS to compromise and come up with a voluntary agreement and future payment plan rather than the possibility of the debt not being paid.


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There are conditions that have to be meant in order to be eligible. When you talk to the experts at TaXectera, we will ask you specific questions to help identify as to whether you will meet these one of the qualifying conditions, and utilize the checklist for the 656 Form as a guideline.

Conditions for Filing An Offer in Compromise

There are three conditions that exist before an installment agreement will be accepted. First and foremost, the doubt as to liability, which refers to a person who owes, should show some reasons that the tax assessed might not be correct. Second, the effective administration of tax, which can reduce the debt of an individual if there’s an explanatory circumstance, mostly being applied to the disabled and elderly taxpayers. Ultimately, the doubt as to collectibility, which means that the individual should show that IRS will unlikely ever to receive the complete overall amount under any kind of circumstance.

The doubt as to collectibility (DATC) is the usual condition that is being accepted. In kind of case the amount to be settled is generally in 60 months of income disposable plus any assets equity that you own. This calculation will be done using the formula provided by the IRS, and once we determine how much disposable income based on allowed monthly expenses and you current income. A complete financial statement will have to be presented and many other documents in order for the IRS to consider you as a possible candidate for the OIC program.

If you owe less than this amount offers in compromise formulas, you’re not eligible for the program offer in compromise. However, this program can be a very great deal for people who owe a huge sum of tax debt. The amount reduced can still be a great help, but still less than the total debt.

Offers in Compromise

Understanding about Tax Levies and Offers in Compromise

If the IRS has already levied your property, then that levy will remain in place until the tax debt has been fully satisfied in accordance to the offer in compromise. Once the debt is paid, then you can request the IRS release the lien.

If however, you submit an OIC to the IRS, it then protects you from the IRS attaching a lien on your property. If your OIC is rejected, you have 30 days to appeal it, and the IRS, while under appeal, cannot Levy your property.

Partial Payments for Cash Settlements

In July 2006, IRS has changed their policies regarding a cash settlement offer. When planning to  file an offer in compromise and making a cash settlement offer, you are required to send in  20% of their debt payment  plus $186 at the time of filing. If the filing fee is not included with the offer, then it will be rejected. The IRS has up to 2 years to determine if they accept or reject your offer. If they don’t respond within 2 years, then the offer is automatically accepted.

Regardless of the direction you take, it only makes sense to get someone that understands the process, the requirements, formulas to put this together and properly present to the IRS. In the case of  low income tax payers, you may be exempt from the tax completely. You cannot assume this, you need to still call and seek counsel at TaXectera. Call today 855-646-9570

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