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IRS Tax Settlement

An Offer in Compromise is an agreement between a taxpayer and the IRS to settle a tax liability for payment of less than the full amount owed. While this amount has varied over time, the last published report by the IRS displayed evidence that the average settlement was for only 12 cents on the dollar (e.g. taxpayers saved 88% of what they owed for accepted OICs). The Offer in Compromise program is available to "provide delinquent taxpayers with a fresh start toward future compliance with the tax laws."

While, the OIC is still a relatively new IRS instrument created 1992 by Section 7122 of the Tax Code, our team’s Tax Attorneys and licensed experts have extensive expertise with planning, preparing, and negotiating Offers in Compromise ("OIC"). The two primary grounds under which an OIC can be successfully negotiated with the IRS are: “doubt as to collectibility” (e.g. the taxpayer is unable to pay the full burden), or "doubt as to liability" (e.g. the taxpayer contends that they owe the debt). There is a more recent third ground for acceptance, "effective tax administration" (e.g. the IRS wants to get as much as they can, and they may potentially think that 12 cents on the dollar is as good as they can do on a taxpayer). For an Offer in Compromise to be accepted, however, the taxpayer has the burden of proof that they either have no possible means of paying the tax or that they do not actually owe the tax.

The primary determinant on "doubt as to collectibility" is based on a taxpayer's personal financial profile; including income, expenses, and assets. The IRS sets strict guidelines for income, allowable expenses (categorized as: Living, Housing, Transport), and available equity in owned assets. An additional benefit of submitting an OIC is that IRS Restructuring Act prohibits the IRS from collecting a tax liability by levy during the period in which the Offer is being processed, or 30 days following rejection of an offer, or during the appeal of an OIC. This window of non-collection is frequently a respite for our clients to avoid any IRS collection actions, thereby securing additional time for clients to pay and prevents the IRS from seizing any assets in the interim.

Call us if you have any questions about the IRS guidelines or the process for preparing, submitting, and negotiating an Offer in Compromise at: 1-800-455-6829.

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