The old cliché is correct: the only certain things in life are death and taxes. The IRS does not easily let up on Americans who do not pay their taxes in full. However, when someone owes a debt to the IRS and cannot pay it completely, the agency will sometimes negotiate an Offer in Compromise, or OIC. These allow taxpayers to settle their tax debts for less than what they fully owe. If you are struggling to repay the IRS in full, this offer may be of interest to you.
An Offer in Compromise allows you as a taxpayer to partially repay your tax liability. Not every taxpayer will qualify—the IRS grants OICs only to taxpayers who cannot pay their tax debt in full, for whom doing so would create a financial hardship. To determine this, the agency considers your:
- Ability to pay
- Monthly or yearly income
- Expenses and other financial obligations
- Assets and property
The process for an Offer in Compromise
There is a multi-step process to have the IRS approve your Offer in Compromise. First, be sure to confirm that you are eligible for an OIC. Then, you will submit your offer. The IRS may try to negotiate with you to collect as much money from you as it can, as soon as it can. During this step—and throughout the entire process—the best way to protect your rights and advocate for your best financial interests is to work with a tax law attorney. Finally, if the agency approves your proposal, you will select a payment method and repay your tax debt accordingly.
OICs and the government shutdown: What to know
The process for obtaining an OIC is slower than it is for filing a standard return. Because the government shutdown postponed tax season this year, applicants have a bit longer to apply for an OIC. If you are considering this offer, use the delay to your advantage, and apply as soon as possible. You should also be aware that, because the IRS may be overloaded and understaffed due to the shutdown, obtaining an OIC may take longer than usual.