What's An IRS OIC?

A process that allows you to pay only a percentage of your tax debt (as little as 1% of the tax due) to the IRS is known as an Offer in Compromise (OIC). To be able to qualify for this, strict requirements must be satisfied.

Though taxpayers have no right to get a tax debt lowered, doing so is still at the IRS's discretion. The odds of getting an OIC accepted is slim, but the IRS are still obliged to provide it a just amount of consideration as long as it's submitted correctly. Furthermore, if your OIC gets rejected, you can get the IRS Appeals Office review it further.

Submitting an OIC has a formal and rigid process involved. First, you must complete the Offer in Compromise Form 656. Submitting this form isn't free, and there's an application fee of $150 that must be included in the form at the time it is submitted. You may be exempt from the fee of $150 if you qualify under particular guidelines for poverty. If you are claiming exempt status, the Form 656 booklet has an Application Fee Worksheet that should be submitted.

The OIC process is tedious, so it is best to determine if your case is compelling enough to justify the time and effort invested in filing it. Along with your form, you will be requested to provide large quantities of documentation like pay stubs, vehicle registrations, and bank records, which could provide the IRS with more information to use against you if your OIC gets rejected.

You should meet any of 3 conditions to be considered for an OIC. One condition Says that there must be doubt as to collectability, meaning there's considerable doubt that the IRS can collect the tax debt from you at present or in the future. Doubt as to liability is another concept. This would entail giving enough proof to doubt if you are indeed responsible for the tax debt. The last concept states that paying your tax debt in full is unfair as it will place you at an extreme economic hardship.