Offer in Compromise

What is an Offer in Compromise?

An Offer in Compromise (OIC) is a program provided to the taxpayers by IRS to help them pay their tax financial obligations. Those who qualify the conditions for eligibility may be permitted to make an offer and guarantee to pay a lower amount of tax owed to the IRS. This enables taxpayers to settle their previous debts and start over fresh so that they can easily pay their present and future financial obligations completely and on time.

Qualifying conditions for an Offer in Compromise

In truth, IRS will not consider an offer in compromise if it isn’t equal to or greater than RCP (Reasonable Collection Potential). It is the determining tool used by the IRS to assess the taxpayer’s paying ability. RCP is the worth understood from the taxpayer’s assets including his realty property, checking account, autos etc. Also included in the RCP is the anticipated future income of the taxpayer minus his living expenses.

Offer in Compromise
Offer in Compromise Program - Carter Vest Law

An offer in compromise can only be accepted by the IRS under these 3 scenarios:

1) Uncertain Liability:

If you want to learn how to get an offer in compromise approved, you must know that your offer will only be thought about eligible and appropriate by the IRS if there is an unpredictable liability. A doubt regarding liability indicates that there is a conflict as to the accurate and authentic amount of tax debt to be paid by the taxpayer under the law.

2) Uncertain Collectability:

Another condition under which one can discover the answer to how to get an offer in compromise approved by the IRS is if you are able to reveal that there is uncertainty that the amount in taxes owned are completely collectible. In such a case where the taxpayers; income and assets, are less than what he/she owes as tax liability, IRS may think about an offer in compromise, also known as doubt as to collectability.

3) Effective tax administration

Finally, IRS might consider your offer in compromise acceptable if it is based on effective tax administration. Under this condition, there is no certainty that the amount owned is legally payable or whether the amount owed can be collected. Under this sort of offer, the taxpayer requests the IRS that he/she is currently confronted with financial challenges, and paying money as taxes will just contribute to the burden. The IRS under such situations may ease the tax pressure from the indebted individual based upon his poor finances and promised future income growth.

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