Tax Solutions

Offer in Compromise

Under the right circumstances, an Offer in Compromise can eliminate or greatly reduce the amount of taxes you owe.

Settle tax debt with an Offer in Compromise.

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“Offers in Compromise (OICs) can be a great solution for Taxpayers that have a large disparity in the amount they owe and their ability to pay based on their income and assets.”

- Alyssa Maloof Whatley

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Pro Tip:

OIC isn’t for everyone.

Getting the right result starts with scheduling your tax strategy session where we review all your documentation and your financial situation so that your OIC is the right solution for your tax debt.

What is an Offer In Compromise?

If you’re facing a huge tax debt, it can be overwhelming. That’s why for some struggling taxpayers, making an Offer in Compromise (OIC) delivers a best-case scenario. While you don’t have an absolute right to a reduction on an outstanding tax bill, often the IRS will, in its discretion, reduce your tax tax liability based on ability to pay.

Yet the reality is that many reasonable OIC are rejected due to paperwork and filing errors.To ensure this doesn’t happen to you, it makes sense to work with a tax professional with years of experience successfully filing and getting OICs accepted the first time.

Because being granted relief using an OIC isn’t easy – if it were, everyone would call the IRS and make an offer to pay less than they owe.

If your talk with a tax expert suggests an OIC is the right route to take, you’ll have someone on your side to help you gather and submit all the financial documentation the IRS will request as part of their consideration of your offer.

Is there a formula to determine how much is a good Offer in Compromise?

Form 433 offers instructions to suggest a minimum offer amount. That amount considers your assets and your income after your day-to-day living expenses are met. Once that figure is determined, you’ll multiply by 12 or 24 based on your repayment period.

If only it were really that simple.

The truth is there’s always a lot of gray area when it comes to the IRS. You may have special circumstances, or you may not be able to afford the payments the IRS calculation suggests.

However, with the right guidance from an expert in OIC, you may be able to get a far better offer for your financial situation accepted by the IRS.

“Be careful of tax resolution companies claiming you can settle your debt for pennies on the dollar without knowing any of your facts. Whether or not an OIC is likely to be accepted is based on each person's facts and circumstances.”

- Alyssa Maloof Whatley

From left to right, Alyssa Maloof Whatley, Harrison Kulp, and Kiara Maxie
Mature woman crossed arms

Who qualifies for an Offer in Compromise?

Eligible taxpayers will be up to date with all required tax filings, estimated payments, and not currently in active bankruptcy proceedings. Individuals will have received at least one tax bill for debt included in the offer. Businesses with employees will be caught up on all federal deposits.

From there, the IRS will review all your available assets and other liabilities to calculate the “reasonable collection potential” of your outstanding tax debt.

Is making an Offer in Compromise a good idea?

Before you take any action with the IRS, you need to be sure that you understand all the pros and cons of your available options.

For some taxpayers, providing the financial disclosures required during the OIC process doesn't make good sense. Letting the IRS see all your “financial cards” might be just what they need to accelerate their collection efforts against you. This is why it’s never a good idea to face the IRS alone.

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Pro Tip:

If my OIC is rejected, do I have other options?

Absolutely, you can always appeal if the offer is rejected. Often times cases with unique fact patterns or special circumstances have to be appealed to get accepted. The OIC is only one avenue to resolve tax debt. Just because this program isn’t right for you doesn’t mean there isn’t a workable solution to your tax issue.

How often does the IRS accept an Offer in Compromise?

You can hardly turn on the radio without hearing about how other taxpayers are settling their tax debt for pennies on the dollar, but the truth is that it’s a lot harder to get an OIC accepted than they want you to believe.

In 2019, the IRS accepted less than 34% of the 55,225 OIC that were requested, and that number has actually declined further in recent years. The low acceptance rate is due to nationwide tax resolution OIC mills and self-prepared OICs that file OICs that are not-likely to be accepted (i.e. don’t met qualifications / offer amount not correctly calculated based on reasonable collection potential) or do not have all the necessary paperwork properly prepared and documented.

Our office will never recommend an OIC if is unlikely to be accepted as it can put you in a worse position and add additional time for the IRS to collect from you.