Offer in Compromise: Answers to Most Common Questions

Listed below are some of the frequently asked questions that we receive about the IRS Offer in Compromise program.

OIC program: scam or genuine?
Offer in Compromise is a real program. But, some tax firms misuse this program by reeling in individuals with fake guarantees and market themselves as having the ability to settle their tax debts for “pennies on the dollar”. The advertisers want people to believe that they've some government influence or power and guarantee to help with paying off their tax debt for 90% less than they owe. These rip-off companies utilize this program as bait for getting citizens to hire them. However the IRS did nothing as of yet to get rid of these tax frauds.

Many Offers in Compromises failed to benefit people due to either: a) they hired an inexperienced tax company (who'll do nothing except cashing on huge fees) to represent them or b) they aren't qualified to apply for an OIC. By having a professional representation, some might have got eligible for a much better deal with the Internal Revenue Service.

Will the IRS keep my tax refunds if my offer in compromise gets approved?
Yes, the IRS will keep any refunds while your OIC is being processed, and also can keep any tax refunds in the year your offer is approved.

What will happen to the federal tax lien?
As soon as an Offer in Compromise is paid completely, the IRS tax lien that was filed against you will automatically be released. It normally takes about two months for this to take place.

Can I prepare and submit an OIC myself?
This is the point. Filling out an Offer in Compromise will never be like preparing a 1040 form. The IRS will invariably look for all possibilities to decline an Offer in Compromise before they accept it. Anything you declare in the form will be questioned. It's much more like an audit and the government is just interested in two things to settle your case: 1. your earnings and 2. your assets.

Exactly how much should I offer in an Offer in Compromise?
Naturally, taxpayers want to pay as low as possible to settle the money they owe. But the amount will be based on your Reasonable Collection Potential (RCP). Calculating the RCP is the most important aspect in determining the outcome of your application. Now your question is, “What number I should put down in the OIC form 656?” This is difficult to answer since there are various aspects that’s need to be taken into consideration. It is advisable to leave this task in the hands of an experienced professional because they're the best person to figure out the minimum amount that will make the IRS to accept it.

Can payroll taxes be paid out with an OIC program?
Yes, a business owner could settle payroll taxes and penalties through an OIC program. However the procedure is far more challenging and in order to strike a deal, they need to get professional guidance from a tax specialist.

Can trust fund recover penalties be settled with an Offer in Compromise?
Yes, you can file an Offer in Compromise to settle your back trust fund taxes that you have to pay to the IRS.

Any IRS Offer in Compromise tips?
Right after acceptance of your Offer, one should comply with tax filing and payment requirements for five years. Fail to do this will lead to your offer getting declared as default and your entire tax debts will come back.