If you have received a tax bill or have past due taxes that you've had problems paying, an Offer in Compromise - otherwise known as an OIC - may be a viable option for tax relief. Although the IRS is particular about why you're asking for an OIC, there are three legitimate reasons to file this request for tax relief.
- Compromise (def): An agreement
in which neither party got what they wanted.
If you have received a tax bill or
have past due taxes that you've had problems paying, an Offer in Compromise -
otherwise known as an OIC - may be a viable option for tax relief. Although the
IRS is particular about why you're asking for an OIC, there are three
legitimate reasons to file this request for tax relief:
Doubt of liability - The IRS isn't sure that the
assessment was correct.
Doubt of collectability - The IRS isn't sure if you can
pay the tax debt in full.
Effective tax administration - Payment of the tax debt
in full may cause undue hardship or you have proven that you cannot pay
the tax debt in full because of circumstances beyond your control.
With an Offer in Compromise, you
agree to pay a certain amount of the tax bill. If the IRS believes that you may
never be able to pay the full tax debt - even if you sold all of your assets -
they may accept your Offer or give you another Offer. Tax relief is given after
the offered amount is paid in full; the rest of the debt is written off.
For instance, if you owe $30,000 in
taxes and fall under doubt of liability, doubt of collectability, or effective
tax administration, the IRS may consider a tax relief claim of an Offer in
Compromise. You might offer to pay $15,000 in two years with a $3,000 down
payment. Here, the IRS may either agree or give a counter Offer. Once the Offer
in Compromise is agreed upon, all collection actions cease.
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