- Uncle Sam isn't one to take "no" for an answer
I often have meetings with potential clients in my office that have seen these commercials and think our tax team can wave that same magic wand, putting together a winning Offer in Compromise (OIC) to settle their debt with the IRS, wiping the slate clean. Unfortunately, I then have to explain to them that this is often far from the truth.
If a person has a tax debt with the IRS there are options to repay the debt that the client may qualify for. Whether it is an OIC, a structured payment plan or some other program that allows the taxpayer to repay the IRS over a period of time depends on their particular situation.
The Offer in Compromise (OIC) is a program under 26 U.S.C. § 7122 which allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed to clear the debt.
To qualify, at least 1 of 3 conditions must be met:
- Doubt as to Liability
- Doubt as to Collectability
- Effective Tax Administration would create an economic hardship that would be unfair and inequitable
Very few cases actually meet one of the 3 conditions above in my experience. A taxpayer would have to be considered permanently disabled, collect social security and have no possible way of ever paying the full tax amount back to have a good chance at having a full or partial OIC accepted by the IRS.
If you believe that you are a good candidate for the OIC, I recommend meeting with several tax professionals and doing your homework prior to paying a professional to attempt a OIC that may not get past the first interview with a OIC IRS Agent.
