Practice Areas • Tax Controversy

OFFER IN COMPROMISE

Settlement Program Offered by the IRS to Resolve Substantial Debts

Many times, our firm’s defense includes preparing the taxpayer for an Offer in Compromise (OIC) with the Internal Revenue Service (IRS). We strongly encourage taxpayers who owe substantial sums to the IRS to negotiate for settlement through an OIC before considering other alternatives. An Offer in Compromise is a program offered by the IRS that provides those taxpayers who owe more than they can manage with an alternative method to resolution. An OIC gives the taxpayer or his or her attorney an opportunity to negotiate with the IRS to settle their outstanding debts for a lump sum amount.

This amount can thereafter be paid in installments without further penalty.  OIC negotiations can be a tedious process for a taxpayer to do alone and can take several months to complete. The IRS can either accept the OIC or reject it outright if they do not feel that the settlement amounts are acceptable.

The IRS looks to the following criteria when accepting or rejecting an Offer in Compromise.

  • Doubt as to Collectability
  • Doubt as to Liability
  • Effective Tax Administration

After an OIC is accepted, it is important that the settlements are followed precisely. If the agreement is breached by the taxpayer after settlement is reached, the IRS could proceed against them for the total amount due including interest and penalties.

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