An offer in compromise is essentially a settlement offer, in which the taxpayer can settle for less than they owe with the IRS. An OIC is not like advertisements claim – settling your tax liability for only pennies on the dollar. But an OIC can help a taxpayer settle their tax debt – sometimes for far less than they owe.

If the taxpayer’s liabilities can be paid-in-full by an installment agreement or any other means, then the taxpayer will normally not be eligible to receive an OIC. And a taxpayer who is currently going through bankruptcy proceeding is also not be eligible for an offer in compromise.

To qualify for an OIC, a taxpayer must have already filed all tax returns, made the required estimated tax payments for the current year and if they are business owners with employees, also made all required federal tax deposits for the current quarter.

The IRS will only consider an offer in compromise if it is for one of the following reasons:

• There is doubt as to whether the IRS correctly determined the amount you owe.
• There is doubt as to whether the debt is fully collectible. This means your assets and income are less than the amount you owe.
• The debt is correct, and you are able to pay the debt in full, but doing so would cause undue economic hardship.
• If you are making an offer in compromise based on the second or third reason, the IRS will take other factors into account.

Offers in compromise are rare, and mostly for taxpayers who cannot pay their full tax liability. If you are one of these taxpayers, or someone who may owe money to the IRS and was wondering if you could get an offer in compromise agreement, please contact the team at Fine and Clear Tax Solutions or call 516-247-9950.