Offers-In-Compromise

An Offer in Compromise (OIC) is an agreement between the taxpayer and the Internal Revenue Service (IRS) that settles a taxpayer's liabilities for less than the amounts owed. The offer program provides taxpayers the ability to pay off tax debt through a lump sum or installment plan, creating a path towards a fresh start. The goal is to reach a compromise that is suitable for both the taxpayer and the IRS.

Simply submitting an application for an Offer in Compromise does not guarantee the IRS will accept the offer. The initial offer begins the process of evaluation and verification by the IRS, taking into consideration any special circumstances that may effect you ability to pay.

In most cases the IRS will not accept your OIC unless the amount offered by the taxpayer is greater than or equal to the Reasonable Collection Potential (RCP). The RCP is how the IRS measures the taxpayer's ability to pay. The RCP includes the value that can be realized from the taxpayer's assets, which include: real property, automobiles, bank accounts, an other property (if applicable). In addition to property, RCP includes future income potential less the cost of basic living expenses.

• Doubt as to liability: A compromise meets this criteria only when there's a genuine dispute as to the existence or amount of the correct tax debt under the law.
• Doubt as to collectibility: A compromise exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability.
• Effective tax administration: An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.