Offer In Compromise

An Offer in Compromise (OIC) is an agreement between the taxpayer and the government that settles a tax liability for payment of less than the full amount owed.  The IRS will generally accept an Offer in Compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. An OIC is a legitimate alternative to declaring a case currently not collectible or to a protracted Installment Agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the government. 

Different types of Offer in Compromise 

Doubt as to Collectibility:  Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection. 

Doubt as to Liability:  A legitimate doubt exists that the taxpayer owes part or all of the assessed tax liability. 

Effective Tax Administration: The taxpayer does not have any doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow us to consider an offer.  To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable. 

DON’T FALL FOR THE QUICK FIX “PENNIES ON THE DOLLAR” PROMISE

While it may be true that your tax liability can be settled for less than the amount you owe, there is no way of knowing the appropriate solution for your individual or business circumstances without first doing an in-depth analysis of your tax liability, and financial position.  Integrity Tax Resolution will be sure to guide you through the process of deciding what may be the best course of action only after we have done an initial assessment all the while you have immediate representation.

What is an adequate proposal?

The IRS specifically states that the success of the Offer in Compromise program will be assured only if taxpayers make adequate compromise proposals consistent with their ability to pay.  We have seen many taxpayers along with other advisors trying to “help” taxpayers with “adequate” proposals really put themselves in a worse position by submitting inadequate proposals.
 
The truth of the matter is, if you or another advisor does not deal with the IRS on a daily basis, nor has experience in submitting an OIC, many of the proposals we have seen done in this manner lack most of the content to get an offer accepted.  Nor do they understand the negotiation process, time or expertise it takes when dealing with various divisions of the IRS.  It is not uncommon for us to be called in to clear up an offer that was not submitted correctly in the past.

The ability to pay

Integrity Tax Resolution makes sure you understand the process the IRS requires taxpayers to adhere to and will be sure the OIC program is indeed a viable solution.The process to determine your “ability to pay” takes time, effort, and strategic planning, especially for individuals with income and assets.  Many individuals or businesses may not qualify for the Offer in Compromise (OIC) program because they have to many assets or their income is to high.  If that is determined through an initial assessment then an Installment Agreement among others may be a possible solution.   

In most cases, the IRS will not accept an Offer in Compromise unless the amount offered by the taxpayer is at least more than the reasonable collection potential. The RCP is how the IRS will measure the taxpayer's ability to pay. The RCP includes the values that can be realized from your assets.  Cars, investment and bank accounts, real-property and more are among the list of assets.  The RCP also includes what the IRS believes your income may be in the future, minus certain amounts allowed for basic living expenses.  The IRS uses their own allowable standards when determining certain living expenses. 

Most Offer in Compromise submissions require very detailed substantiation and documentation of your assets and income.  The IRS will use a collection information statement CIS, to determine your ability to pay.  The form for an individual is called 433-A.  The form for a business is called 433-B.  The forms can be very intimidating if you have never dealt with trying to fill them out and then having to document everything that is required on the form.  Integrity Tax Resolution will make sure you understand how to fill out the forms to your benefit.  We will go through different drafts before a final submission to make sure you have the best possible offer that has a high chance of acceptance. 

The offer is submitted now what?

If it is determined that it will be beneficial for you to pursue an Offer in Compromise rather than Currently Not Collectable or an Installment Agreement and we move forward with the submission of an OIC, the process is far from over.  This is where the real negotiation begins.  The Offer will need to be reviewed by the IRS.  This process takes time.  After it has been reviewed, more times than not the IRS will send it’s own Asset/Equity and Income/Expense tables back to us in response of our submission of the Offer in Compromise.  And what do you know.  Their tables show that you have more assets and income than what was originally submitted?  How can that be?  Remember they want your ability to pay as high as possible so they can collect more money.  That is their duty and responsibility.  So where do you go from here? 

All is not lost.  Integrity Tax Resolution must negotiate to get the best possible outcome; hopefully the officer who is handling your file did not have a bad week.  But even if they did, Integrity Tax Resolution Representatives are experts and know how to handle all aspects of getting an offer accepted.  Negotiation is a big part of the process.  During the process you will be informed every step of the way.  Take a look at our communication and updates section.   

Have you ever negotiated a tax settlement program such as an Offer in Compromise before?  If the answer is no, don’t be your own guinea pig with the IRS.  Again, Integrity Tax Resolution comes across individuals who have never faced this process but yet tried to handle it alone.  That is why they now have Integrity Tax Resolution to help get them back on track. 

If your offer is rejected what can you do? 

What other tax resolution companies may fail to tell you is that not all Offer in Compromise submissions are accepted.  After you receive notice of rejection you will have 30 days from the date of your rejection letter to file your appeal.  It is not uncommon for an Offer in Compromise to be accepted in appeals.  Have you ever negotiated an appeal of a rejected Offer in Compromise?  Integrity Tax Resolution is experienced in negotiating tax resolution for individuals and business.

You can appeal

• Before or after the IRS files a Notice of Federal Tax Lien.
• Before or after the IRS levies or seizes your property.
• A Termination of an installment agreement.
• A Rejection of an installment agreement.
• Other circumstances when collection activity is threatened