IRS Offer in Compromise

IRS Offer in Compromise

First, what is an IRS offer in compromise?  An IRS offer in compromise allows a taxpayer to settle his tax debt for less than the full amount owed.  The three types of offers in compromise include:  (1) doubt as to collectibility, (2) doubt as to liability, and/or (3) an exceptional circumstance.

The IRS considers the following facts and circumstances when evaluating doubt as to collectibility:

  1. Ability to pay;
  2. Income;
  3. Expenses; and
  4. Asset equity.

Generally, the IRS approves an offer in compromise when the amount offered represents the most the IRS can expect to collect within a reasonable period of time.

IRS Raises OIC Fees

Effective January 1, 2014, the Internal Revenue Service increased the fee for doubt as to collectability offers in compromise from $150 to $186.  However, the IRS recently proposed increasing the cost of the user fee for filing an Offer in Compromise to $300, starting February 27, 2017.

IRS offer in compromise rules tightened

The IRS updated its policy covering Offer in Compromise‎ applications in March, 2017.  The IRS will return OIC applications and the application fee without consideration where the taxpayer has unfiled tax returns.  However, any required initial payment submitted with the Offer will be applied to outstanding tax debt.

Offers in compromise and related tax issues are complex.  Therefore, retain a Chicago CPA and attorney to represent you.