Offer in Compromise
Offer in Compromise (OIC) allows you to pay less than the amount you owe to Internal Revenue Service. The Internal Revenue Service, at its discretion, will allow you to pay less if they are not sure whether they will ever be able to recover the money from you or maybe there’s an uncertainty regarding whether you’re actually accountable for the tax debt. With that said, here is what you should know about offer in compromise.
How to apply for an OIC?
You’ll need to fill in Form 656, which is form for OIC, together with Form 433-AOIC, which is a Collection Information Statement. Additionally, you will need to calculate the payment amount you are offering towards the IRS using the Form 433AOIC, which is a Worksheet.
What are the terms and conditions of the compromise made?
The Internal Revenue Service sets forth all of the Contractual Conditions in the OIC. Simply put, after signing the contract you agree to:
- Pay the amount offered to you before the mentioned deadline.
- File your tax statements by the due date and pay your taxes promptly for the upcoming 5 yrs. 2.You may NOT file for an extension for the next 5 years. If you fail to file by April 15th the IRS will rescind the offer and all interest and penalties will resume and the suspended Statue of Limitation will then resume. The Service will not accept any excuse as compliance is one of the terms of executing an Offer In Compromise.
- Allow the IRS to keep any credits, payments and tax refunds applied on your tax debts before submitting your OIC.
- Allow the IRS to keep any tax refunds that may have been entitled to receive for the year you have filed OIC as this is one of the terms when filing for OIC.
What can you do to avoid OIC being revoked?
Unless you follow all the conditions of the Offer contract, the Internal Revenue Service will revoke the OIC and reinstate the whole volume of tax liability. In the event the IRS revokes your OIC, they’ll reinstate the whole volume of your tax liability and add on the interest and penalty. In addition, they might commence aggressive collection efforts. Should this happen they do allow time to file for an Appeal before it is closed completely.
Is it possible for me to pay “pennies in the dollar” to settle my tax debts?
The advertising slogan, “pay pennies on the dollar,” may be misleading. For an OIC to be successful, an individual pays less than the whole sum of taxes, fees and interest he owes to the IRS. However, it is necessary for him to prove that the sum he or she is paying is equivalent or maybe more than the reasonable collection potential determined by the IRS. In a broader sense, the reasonable collection potential will be the IRS’ best guess on the amount of money you are able to put together in the following twenty four months to settle your debts.
How long does it take to get an OIC application approved?
The process generally takes between one and two years to complete. Here is a timeline for an OIC:
- Preparing the OIC forms and backup documentation (1-4 months)
- IRS Processing the OIC (13-18 months)
- Finalizing the Offer and Making Payment Arrangements (1-3 months)
In line with the newest statistics, the internal revenue service needs at least 380 days to process the OIC. Your processing time might be shorter or more than this. In order to prevent the delay made in the approval, make sure that you have sent all the documents required.