Offer in Compromise CPA

FAQs

• How is the offer amount determined in an Offer in Compromise?

  The offer amount in an Offer in Compromise (OIC) is typically based on the taxpayer's ability to pay, which considers factors such as income, expenses, assets, and future earning potential. The IRS evaluates the taxpayer's financial situation to determine the maximum amount they can reasonably collect over a specified period. This calculation varies for each taxpayer and is subject to negotiation.

• What payment options are available for OIC?

  The Offer in Compromise (OIC) program offers two primary payment options for taxpayers:

  1. Lump Sum Cash Payment: Taxpayers can choose to make a one-time lump sum payment to settle their tax debt. This option requires the taxpayer to pay the offered amount in full within a relatively short period, typically within a few months of the IRS accepting the offer. Lump sum cash payments are often preferred by individuals who have access to immediate funds, such as savings, a loan, or asset liquidation.
  2. Periodic Payment: Alternatively, taxpayers can opt for periodic payments, where they agree to make a series of installment payments over time. This option allows individuals to spread out the payment of their tax debt so it’s more manageable within their financial means. Taxpayers must agree to adhere to a specific payment schedule outlined by the IRS, typically ranging from several months to a few years, until the total offered amount is paid in full.
     Both payment options are subject to evaluation by the IRS, which considers the taxpayer's financial situation and ability to pay when determining the appropriate payment terms and amount for the Offer in Compromise.

• What documentation do I need to submit with my Offer in Compromise application?

  Documentation requirements for an Offer in Compromise application typically include:

  • Completed Form 656, Offer in Compromise;
  • ‍Form 433-A (OIC) (for individuals) or Form 433-B (OIC) (for businesses);
  • Proof of income (pay stubs, profit and loss statements, etc.);
  • Bank statements;
  • Asset documentation (property deeds, investment statements, etc.);
  • Tax returns for the current year and previous years;
  • Any other relevant financial documents requested by the IRS.

• How long does it take to process an Offer in Compromise?

  The processing time for an Offer in Compromise can vary depending on factors such as the complexity of the case, the backlog of applications at the IRS, and whether additional information or negotiations are required. Generally, it can take anywhere from several months to over a year for the IRS to review and make a decision on an Offer in Compromise application. If you work with our team, we’ll always keep you updated on the timeline and provide updates along the way.
  

• What happens if my Offer in Compromise is accepted?

  If the IRS accepts your Offer in Compromise, you’ll need to fulfill the terms of the agreement, which typically involve making the agreed-upon payment(s) and remaining in compliance with tax laws for a specified period. Once you fulfill the terms of the OIC, the remaining tax debt included in the offer is considered settled, and you are released from any further obligation to pay.

• What are the consequences if my Offer in Compromise is rejected?

  If your Offer in Compromise is rejected, you have the option to appeal the decision or explore alternative options for resolving your tax debt. If you don’t appeal or submit a new offer, you will remain responsible for the full amount of your tax debt, and the IRS may resume collection actions such as wage garnishments, bank levies, or property seizures. It's crucial to consult with a tax professional to explore your options and determine the best course of action if your OIC is rejected.