signing document

IRS offer in Compromise

The IRS offer in compromise program has been around for decades. In theory, the program serves the best interests of all concerned, enabling the government to collect what it can from the taxpayer, and relieving the taxpayer a tax burden he cannot pay.

To qualify for an OIC, you must prove that you can’t pay the total balances owed before the collection statute expires, using net equity in assets plus any future income. The IRS calculates future income as the amount it can collect on a monthly basis (monthly disposable income) before the collection statute expires. While the number of OICs accepted by the IRS is small compared with the number of taxpayers who have outstanding balances, more taxpayers are qualifying for and obtaining OICs due to the 2011 IRS Fresh Start Initiative, which softened qualification criteria and allowed for lower offer amounts.

In 2004, the IRS issued a consumer alert warning of promoters’ claims to settle debts for “pennies on the dollar” through the OIC program. The warning addressed companies charging high fees to consumers who may not be eligible for the program; all other payment means would have to be exhausted, including installment payments. It is highly recommended to all that are seeking guidance for tax relief to consult with a qualified attorney such as the attorneys at Campbell & Coombs, P.C.