Required Documents for an Offer in Compromise

When you submit an Offer in Compromise, you will need to have plenty of documentation included to support your case. Your paperwork will be assigned to an Offer Specialist who will verify your income and expenses by matching them against your bank statements, rent or mortgage agreements, utilities bills, and more.

Typically, three months’ of these sorts of documents are required — most figures you claim, whether sources of income or IRS-qualified expenses, must be backed up with solid paperwork. When an Offer Specialist reviews your Offer, you want to be sure that he or she gets a complete verifiable view of your financial situation so that you don’t run the risk of losing the 20% deposit (and $150 fee) that you pay when the OIC is submitted. A big part of the job is making sure that the Offer Specialist can do their job smoothly, without spending time looking for follow-up information.

Understanding how to submit a solid Offer in Compromise application and the documents that are involved is not easy. That’s why tax professionals exist; having an experienced pro who can zealously represent you before the IRS can be a big advantage when you are considering an OIC tax settlement.

Offerincompromisetips.com partners with federally authorized tax practitioners such as attorneys, CPAs, and enrolled agents, all of whom have had great success negotiating the ins and outs of IRS collections and the Offer in Compromise program requirements. If you want to talk to one of them confidentially to discuss the specifics of your case, call 773-234-2847. Even if you don’t qualify for an Offer, they can help you develop a custom alternative solution depending on your tax resolution needs.

Doubt as to Liability Offer in Compromise (OIC)

A Doubt as to Liability Offer in Compromise is used when a taxpayer does not believe they actually owe the back tax liability. As opposed to the traditional Doubt as to Collectability Offer in Compromise where the taxpayer contends they can’t pay the tax debt in full, in a Doubt as to Liability Offer in Compromise the taxpayer contends they don’t owe the back tax liability to begin with. There are two types of Doubt as to Liability Offers in Compromise:

Examination issue Doubt as to Liability Offer in Compromise: These arise when a Taxpayer believes that a mistake was made in examination that resulted in a tax liability.

Legal or factual issue Doubt as to Liability Offer in Compromise: The most common Offer in Compromise submitted under these grounds will be in response to a Trust Fund Recovery Penalty Assessment. Here the Taxpayer’s Offer in Compromise will lay out both legal and factual grounds why their assessment of the Trust Fund Recovery Penalty was improper.

Offerincompromisetips.com offers free consulations with tax professionals admitted to practice before the IRS. Don’t hesitate to call us at 773-234-2847 to learn how we can help if you think you qualify for a Doubt as to Liability Offer in Compromise.

Will Your Offer in Compromise Be Processed?

A large number of Offer in Compromise applications are returned as being unable to process by IRS staff. An Offer cannot be processed if it is missing any of the required forms, is missing any required backup documentation, or if you have not enclosed payment or a request for a fee waiver. An Offer also cannot be processed if you are not current on your tax obligations.

Here’s a checklist of all requirements in order for your Offer in Compromise to be considered “processable” by the IRS:

  • Must not have an open bankruptcy case,
  • Must have filed all federal tax returns that you are required to file,
  • Must have filed payroll tax returns and made on-time deposits of payroll taxes for the prior two quarters (for business taxpayers),
  • Must pay $150 Offer in Compromise application fee, or request a fee waiver,
  • Must submit IRS Forms 656, 433-A, and/or 433-B, along with support documentation, and
  • Must be current with estimated taxes and/or income tax withholding for the current year.

If you have any questions about these requirements and how to meet them, don’t hesitate to call one of our Enrolled Agents (admitted to practice before the IRS) at 773-234-2847 for a FREE consultation. We’re here to help.

Offer in Compromise Terms and Conditions

How Do I Apply for an Offer in Compromise?

You will need to fill out Form 656, Offer in Compromise, along with Form 433-A, Collection Information Statement. You will also need to calculate the payment amount you offer to the IRS using the Form 433-A Worksheet. These forms and the calculations involved can be complicated, so we recommend hiring a tax professional to reduce your stress and increase the chances of a successful Offer in Compromise.

What are the terms and conditions of the Offer in Compromise contract?

The IRS sets forth all the Contractual Terms in an Offer in Compromise.

In a nutshell, you agree to

  • Pay the offer amount in the Offer in Compromise.
  • File your tax returns on-time and pay your taxes on-time for the next five years.
  • Let the IRS keep any tax refunds, payments, and credits applied to your tax debts prior to submitting your Offer in Compromise.
  • Let the IRS keep any tax refunds that would have been payable to you during the calendar year that your Offer in Compromise is approved.

If you don’t fulfill the terms of the Offer contract, the IRS can (and probably will) revoke the Offer in Compromise and reinstate the full amount of tax liability.

What can I do to protect my Offer in Compromise from being revoked?

If your Offer in Compromise has been approved, you need to make sure the IRS does not revoke your Offer. At all costs, make sure that you:

  • File your taxes on-time for the next five years.
  • If you cannot file by April 15th, request an automatic extension. Definitely file your taxes by the extension deadline.
  • Pay your taxes on-time. If you owe, your taxes must be paid in full by April 15th. Make estimated payments or extension payments to make sure you don’t have a balance due.

If the IRS revokes your Offer in Compromise, they will reinstate the full amount of your tax liability, add on penalties and interest, and begin aggressive collection efforts.

For more Offer in Compromise tips, contact an experienced Enrolled Agent at 773-234-2847 for a FREE consultation.

Choosing a Tax Professional to Help You with an Offer in Compromise

An Offer in Compromise is a formal way to negotiate your tax debts with the Internal Revenue Service.

An Offer in Compromise is a lengthy and time-consuming process. It takes most people anywhere from 12 months to 24 months to achieve a successful resolution on your offer application. But the odds of succeeding are slim. Only about 16% of applicants succeed in reducing their debts through the Offer in Compromise program.

Through an Offer in Compromise, taxpayers agree to pay the IRS only the reasonable collection potential instead of the full amount of taxes owed. For some people the “reasonable collection potential” will be less than the full amount of taxes owed – sometimes far less. Some taxpayers will not qualify for an Offer in Compromise.

Because of the complexity of filing an Offer in Compromise, many people seek the help of tax professionals. Generally, seeking professional advice for an Offer in Compromise is highly recommended. Here’s how to protect yourself and find the right tax professional for you.

Selecting a Tax Professional to handle your Offer in Compromise

Because of the complexity of the Offer in Compromise process, many taxpayers hire a tax professional to prepare their Offer documentation and to negotiate with the IRS. Tax professionals charge anywhere from $1,500 to $3,000 or more for accurate and thorough Offer in Compromise representation. Because an OIC also involves negotiating with the IRS, your tax professional should be admitted to practice before the IRS. You should be looking for a tax attorney, Certified Public Accountant (CPA), or Enrolled Agent (EA), to handle your Offer in Compromise.

Beware of Offer in Compromise scams!

Many unscrupulous tax preparers will quote you a seemingly affordable price for your Offer in Compromise. Such preparers will prepare your Offer in Compromise forms, but will not prepare the necessary backup documentation, and will not negotiate with the IRS for you. All they do is type up the forms and mail it to the IRS. This is a waste of time and money. To protect yourself, find a tax professional that is experienced, qualified, and has a good personality. You are going to be working with this person very closely for the next year or two, so make sure you feel absolutely comfortable.

Selecting the Right Tax Professional

Filing an offer in compromise requires significant expertise. The tax professional must know about the laws governing IRS collection of tax debts, how the IRS evaluates offers, and what all the options are for resolving tax debt problems. Taxpayers should look for a tax professional with significant experience in IRS collection matters, especially experience in dealing with revenue officers, the Automated Collection Systems division, and Appeals.

Questions to Ask

Some of the things to look for:

  • Is the tax professional an attorney, CPA or Enrolled Agent?
  • How many Offer clients does the person handle?
  • What percentage of clients have been successful in their Offers?
  • What is their fee?
  • Does the fee include preparation of all IRS forms, all backup documentation, and all negotiation with the IRS?

Please be aware that even the most successful tax professionals have lost Offer in Compromise cases. It is important to know that your Offer in Compromise will be decided based on your unique financial situation. Having a tax professional represent you before the IRS will help ensure that all letters and phone calls from the IRS are handled quickly and professionally. But in the end, it is up to the IRS to make a decision about your case.

Ask tax professionals how they handle OIC rejections, and if they will help you create a backup strategy for handling your tax debt. Reputable firms will have a backup plan for their clients, since the IRS approves so few Offers.

What Are the Chances of an Offer in Compromise Being Accepted?

The Internal Revenue Service approves only a minority of offer in compromise applications each year. In 2004, the IRS approved 19,546 offers, about 16% of the total number of offers received. As of May 2010, the IRS has accepted about 24% of offers. On average, taxpayers with accepted offers paid back 12 cents for every dollar they owed. (Source: National Taxpayer Advocate, 2011 Objectives Report to Congress.)

The key to a successful Offer in Compromise is making sure that the IRS can process your application, and that you submit complete backup documentation to support your offer. Because offers can be rejected for several reasons, we recommend hiring an experienced tax professional who knows the OIC program inside and out. This will increase your chances of having a slam-dunk offer and minimize the follow-up correspondence with IRS agents.

Also, bear in mind that the IRS usually requests a nonrefundable 20% down payment of your settlement offer at the time you submit your request — if you make a math mistake or neglect to provide complete backup documentation, it could feasibly cost you thousands of dollars (though these funds will be applied as a credit towards your tax debt).

If you’re considering filling out the forms yourself, we recommend calling 773-234-2847 to speak with an experienced Enrolled Agent who is admitted to represent taxpayers before the Internal Revenue Service. Call today, and get on the path to tax freedom!

Streamlined Offer in Compromise Changes

Now it’s easier than ever to obtain a tax settlement offer. The IRS took measures in May 2011 to streamline the OIC program, which means fewer denials and greater leniency regarding qualified monthly expenses:

As a result of a study conducted on the OIC program in 2009, a streamline offer program was implemented on June 28, 2010 in the Brookhaven and Memphis COIC Campuses. Currently, COIC criteria is defined as a wage earner and self-employed taxpayer with gross receipts of $500,000 or less and no employees. Qualified streamline OIC taxpayers have total household income of $100,000 or less and a total liability of less than $50,000. These offers will be worked with greater reliance on internal research, telephonic communication, and additional allowances for expenses and future income calculation.

Contact us ASAP at (773) 234-2847 to find out if you may qualify for an IRS Offer in Compromise. Don’t wait for a levy notice, a federal tax lien, or, worse yet, a knock on your door from an IRS Revenue Office!

"Pennies on the Dollar" Tax Savings

If you’ve heard of “pennies on the dollar” tax debt savings on TV or radio ads, they refer to the IRS Offer in Compromise tax settlement program. Not everyone with an approved settlement offer saves that much, however, so it’s important to have an educated professional consult with you before pursuing an OIC. Worse, some people actually wind up losing money trying to file an OIC by themselves, since the IRS typically requires a 20% nonrefundable deposit of the proposed settlement amount without guarantee of acceptance. If you’re going to file an Offer in Compromise, don’t gamble and lose by guessing your way through the forms yourself.

IRS Offer in Compromise (OIC)


free help, information, rules, and tips about the back-taxes settlement program.

If you're living paycheck to paycheck, you may be able to settle with the IRS for less than you owe! Find out if you qualify: call (773) 234-2847 for a FREE consultation with an Enrolled Agent. We use the same platform as the IRS to determine your eligibility. Avoid unnecessary penalties and interest and get started with the tax resolution process today!

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