What Is An Offer In Compromise, And Do You Qualify?

In this article, you will discover:

• What an Offer in Compromise is, and how to know if you’re eligible
• How the IRS evaluates an Offer in Compromise
• The documents necessary to support an Offer in Compromise

What Is An Offer In Compromise (OIC), And How Does It Work?

An Offer in Compromise is an IRS program that allows certain taxpayers to pay less than the total amount they owe. It is a program based on calculations and is quite precise. 

To begin, you must fill out a comprehensive financial statement. Then, we look at your assets and monthly income to calculate a number. If that number is less than the total you owe, we can submit an Offer in Compromise for you. 

How Do I Know If I Qualify For An Offer In Compromise?

I will give you a financial statement to complete. You bring in supporting documents that show your numbers are correct. Then, I analyze that statement to determine your assets. 

A portion of your assets have to be a part of the offer. Your calculated current income and expenses would be another portion. Together, they would make up what we would offer the IRS. 

What Factors Does The IRS Consider When Evaluating An OIC?

The first factor is assets you own that the IRS views as usable in an offer. These include assets such as IRAs, 401k’s, large savings accounts, expensive boats, an airplane or fancy cars. The IRS generally doesn’t look at your home unless you have a lot of equity in it. In that case, they want you to try borrowing the equity out of the home to add to the offer. Finally, they look at your residual monthly income after expenses. 

How Do I Calculate An Accurate Offer Amount?

You calculate a number based on your assets and disposable income month after month. That calculation tells me what I can offer the IRS in the hope they will accept. If that number is too high, you may feel unable to pay that amount, even though it is less than what you owe. You have to decide, after we calculate the offer amount, if you want to move forward with it. 

What Documents Do I Need To Submit An Offer In Compromise?

The first document will be a financial statement we help you put together that tells us all of your assets, liabilities, income and expenses. In conjunction with that form, you will provide:

• Your current three months of bills, such as utility bills, car payments and mortgage payments
• Statements, including bank statements, proof of investments, IRA statements and 401k statements
• Pay stubs to determine your average monthly income 

How Long Does The OIC Approval Process Take?

Most of the time, the approval process takes about a year, sometimes a little less, or sometimes more. It takes several months for the offer to be assigned to an offer specialist. 

Once we submit the offer, we begin negotiating. If the IRS requests more documents, I’ll submit them during the negotiation process. If our offer is rejected, many times we will appeal that to a higher level: an appeals officer. That could take another six to eight months. 

Still Have Questions? Ready To Get Started?

For more information on qualifying for an Offer to Compromise, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.