An
offer in compromise (OIC) is an agreement between the tax payer and the Internal Revenue Service (IRS). This agreement resolves the tax payer's tax debts for less than the full amount owed.
But it's not that simple.
You see, if the IRS believes that the tax payer's tax debts can be paid (either in a lump sum or through monthly payments), then the IRS will not extend an offer in compromise.
Here's how they make that determination...
Reasonable Collection Potential (RCP)
Reasonable collection potential is a measurement the IRS uses to assess the tax payer's financial situation. It takes into account assets such as...
- Real Property
- Automobiles
- Bank Accounts
- and Other Property
RCP also takes into account...
- Anticipated future income
- and Basic living expenses
Qualifications & Fees
Again, not everyone who applies for an offer in compromise will be accepted. So, double-check the list of qualifications before you apply.
Step 1: The qualifications
- Do you currently have an open bankruptcy proceeding? (If yes, then your application cannot be considered at this time.)
- You must either pay the $150 application fee or send in a completed Form 656-A (whichever applies).
- All offers must include your 20% payment for Lump Sum Cash payment offers, or your first installment payment of your Periodic Payment offer, or Form 656-A. (If you do not, then your application will not be processed.)
Be Careful
There are promoters who claim they can provide IRS tax help and settle your tax debts for "pennies on the dollar" through the Offer In Compromise program.
And maybe they can help. I don't know.
The above step is just the first of several steps you'll need to take to qualify for the offer in compromise. Click here for
Offer in Compromise - Step 2.