IRS Offer in Compromise for Those Struggling with Tax Debts

In the current difficult economic climate, many in Illinois are struggling with finances and unpaid debts. Those who owe money to the IRS may feel like they have nowhere to turn, but in reality they do have options. One way to try to settle with the IRS is to take advantage of the IRS's Offer in Compromise (OIC) option.

Offer in Compromise

The IRS Offer in Compromise is a program that lets taxpayers settle their tax debts for less than the actual amount the debtor owes. To make an offer under the OIC program, the debtor must fill out several forms and mail them in with the application fee and a portion of the settlement offer. Those who meet the low income criteria may omit the application fee and initial payment.

While the debtor is waiting for the IRS to decide whether to accept the offer, the taxpayer should continue paying on the offer plan. The IRS will suspend collection actions while considering the offer.

When to Use an Offer in Compromise

The IRS generally accepts OIC applications only if the offer that the applicant makes is the most money that the IRS can expect to see from the taxpayer within a reasonable amount of time. In deciding whether to accept the offer, the IRS will consider the debtor's:

  • Asset equity
  • Income
  • Ability to pay
  • Expenses

If the debtor's information indicates that paying the full debt is not possible or would create an economic hardship for the debtor, the IRS will likely accept the offer.

An OIC is also appropriate when the debtor disputes the amount of the debt.

How an Attorney Can Help

Those seeking to make an offer to the IRS may want to consider seeking the advice of an attorney. The process can be complicated. The IRS wants people to consider an OIC as a last option and try other payment plans prior to making an offer. An attorney can help negotiate with the IRS, and help a debtor make the best case possible for an OIC.

If you owe the IRS money and cannot pay the full amount, meet with an attorney who can discuss your options with you.