IRS Offer in Compromise (OIC)

TAX CASE EVALUATION

What is an IRS Offer in Compromise (OIC)?

An offer in compromise is an agreement between a taxpayer and the IRS to settle a tax debt for less than what a taxpayer owes.  If you cannot pay the full amount owed to the IRS, but are willing to pay a fraction of the amount owed in full satisfaction of your tax debt, an offer in compromise is the right path for you.  An offer in compromise is a very effective and efficient way to get a fresh start and eliminate your tax debt.  This solution is one that best benefits the taxpayer as well as the IRS.

The most common offer in compromise (OIC) is a “Doubt as to Collectibility Offer.”  In determining whether to accept this offer in compromise, the IRS will look at your ability to pay, based on your assets, future earning potential, and current income and living expenses.

Another type of offer in compromise (OIC) is a “Doubt as to Liability Offer.”  Here, the IRS does not consider your current income in deciding whether to accept the offer.  Instead, a doubt as to liability offer gives a taxpayer an opportunity to settle tax debt for a fraction of what is owed if the taxpayer has reason to believe he or she does not in fact owe the amount that the IRS claims he owes.  Doubt as to liability offers are not available to taxpayers who have already litigated their tax debt in court.

The last type of offer in compromise (OIC) is an “Effective Tax Administration Offer.”  In these offers, the IRS will consider all facts and circumstances in determining whether to accept the offer.  These offers are available for taxpayers who don’t dispute that the tax debt is owed to the IRS but instead face exceptional circumstances which effects their ability to pay the debt.

Unlike accountants and other so-called “tax professionals,” the attorneys of Dallo Law Group are trained in the area of tax negotiation and will put our 10+ years of tax experience to work for you!

Eligibility Requirements for Offer in Compromise

This IRS program can significantly reduce your tax liability, but it’s crucial to meet the eligibility requirements to qualify. Here’s what you need to know:

  1. Tax Liability: You must have a legitimate tax liability that you genuinely cannot pay in full. This includes income tax, self-employment tax, or payroll tax.

  2. Filing and Payment Compliance: Ensure that you’ve filed all required tax returns and made estimated tax payments for the current year. Staying compliant is key.

  3. No Open Bankruptcy: You cannot be in an open bankruptcy proceeding. Resolving your tax debt through an OIC is typically not an option during this period.

  4. Properly Submitted OIC Application: A well-prepared OIC application is vital. Our tax attorneys will help you complete all the necessary forms and documentation accurately.

  5. Financial Disclosure: You’ll need to provide detailed financial information to demonstrate your inability to pay the full tax debt. This includes your income, expenses, and assets

How to Make an Offer in Compromise

In order to initiate the OIC process in San Diego and all of California, you must follow these steps:

  1. Determine Eligibility: First and foremost, ascertain whether you meet the basic eligibility for OIC, including current tax compliance.

  2. Seek Professional Guidance: Given the complexities of federal tax law and the OIC process, it’s highly advisable to consult with a tax attorney who specializes in IRS collections tax matters. Our team can help you assess your eligibility, navigate the requirements, and guide you through the process.

  3. Prepare Forms: The next step involves completing the necessary IRS forms, including Form 656, Offer in Compromise, and Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B (OIC), Collection Information Statement for Businesses. These forms will provide detailed information about your financial situation.

  4. Submit Supporting Documentation: To support your OIC application, you’ll need to provide various financial documents, such as bank statements, pay stubs, and proof of your monthly living expenses. Your tax attorney can assist you in assembling and organizing this vital documentation.

  5. Calculate Your Offer Amount: Work with our San Diego tax attorneys to determine the appropriate amount you can offer to the IRS based on your financial situation. The offer amount should reflect your true ability to pay, taking into account your income, expenses, and asset equity.

  6. Submit Your Offer: Once your OIC application is meticulously prepared, submit it to the IRS along with the required application fee. After the offer in compromise (OIC) is submitted to the IRS, it tends to take between four and six months to hear from the IRS. After the IRS contacts us regarding your offer, we will zealously negotiate with the IRS for the best possible offer

Navigating the Offer in Compromise process can be complex, but with the right guidance and expertise, you can increase your chances of successfully reducing your tax debt. Because we are educated and experienced in navigating through the tax laws and the IRS employee handbook, Dallo Law Group can competently prepare the best offer package for you and maximize the chances of IRS approval.

CASE STUDY
Our retired client came to us in desperate need of assistance after she was notified that she had a $35,000 tax bill. To make matters worse, her only source of income was her social security and some retirement pension payments, and these she was told would soon be under garnishment for the back taxes. Understandably, this stressful situation was weighing heavily on our client because she deeply relied on her modest income to pay for her basic living expenses, which were now under threat.

Our plan was not only to stop the garnishment efforts, but also to reduce the tax bill, which with some experienced give and take we were successful in doing. We were able to negotiate an offer in compromise and slash the back taxes owed down to a mere $1000, a far better and more manageable bill.

Is an offer in compromise the right solution?

While the offer in compromise (OIC) program is a very popular way for taxpayers to settle their tax debt with the IRS, it is not right for everybody.  There is no “one size fits all” offer in compromise package and determining whether an OIC is the right settlement approach requires a case-by-base determination of the facts and circumstances of the taxpayer.

***IMPORTANT NOTE*** Beware of tax resolution companies who advertise and promise to settle your tax debt for “pennies on the dollar.”  While some OIC cases can settle for a significant discount, a proper analysis must be made to determine the proper offer amount.   Many of these tax resolution companies do not employ any tax attorneys and are not trained in understanding and dealing with the tax laws and simply provide empty promises.  Many of these companies have significant consumer complaints and some have been forced to close down.

Dallo Law Group is trained and experienced in the offer in compromise (OIC) area and can provide significant results in settling your tax debt.  Contact Dallo Law Group to schedule a consultation so we can determine whether an OIC is the right vehicle for your tax dispute.

Contact us to schedule a consultation so we can determine if an offer is the right solution for your case.

How much should we offer the IRS?

Determining the right offer amount depends on both the individual facts and circumstances of each case as well as the type of offer submitted.  IRS Offer Specialists use the “reasonable collection potential” or RCP to determine whether a proposed Offer is in the best interest of the government.  The RCP is the amount the IRS would be able to collect from the taxpayer prior to the statutory expiration of their collection rights. Contact Dallo Law Group to schedule a consultation so that we can determine the proper offer amount to maximize the probability of acceptance by the IRS. The RCP in some cases is less than the amount of taxes owed, and sometimes even far less.

What other IRS tax debt settlements are available?

There are several tax debt settlement options that may be available for you.  Even if you may not qualify for an offer in compromise (OIC) or if we determine that an offer is not the best option to settle your tax debt, you may still qualify for an installment agreement or currently not collectable status. Contact Dallo Law Group to schedule a consultation to determine which tax settlement option is right for you!

How can a San Diego tax attorney at Dallo Law Group help with my OIC?

Dallo Law Group practices exclusively in the area of tax controversy, including IRS collection matters. Offers in compromise (OIC) are a significant portion of our tax practice. IRS has OIC and therefore it is often very difficult to successfully negotiate an OIC with IRS.e. We have the experience, knowledge, and technical know-how to produce the best settlement results for you. Although it may take months to hear back from the IRS, we will guide you through every step of the process and ensure that the IRS seizes all collection activities while the offer is pending. Keep in mind, if the IRS rejects an offer, the taxpayer will be notified why and can then file a new offer or appeal the denial with the appeals division.

Unlike many of the nationwide tax resolution companies who advertise on the television and the radio, our local reputation and your satisfaction are of the highest importance to our firm. Not every taxpayer is a strong candidate for an OIC. For this reason, every offer in compromise (OIC) requires a thorough and individualized tax analysis to determine whether the offer in compromise (OIC) is right for you and, if so, how much you should offer. Contact our team of experts now to get started with submitting your OIC application.