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    The IRS OIC Program

    December 26, 2019 | Tax Issues

    The IRS OIC Program

    When you read advertisements, such as “Settle your Bank Taxes for pennies, Free Tax Evaluation Now!”, you need to pause and consider whether the services will be helpful to you, or will they just cost you money with no relief to the bank taxes you owe.

    While it’s true the IRS has a program that allows taxpayers to settle their tax debts for less than the total amount owed, not every tax case will see relief under that program and it takes a lost of effort to determine if your tax situation is a good fit for the program. Therefore, it is misleading to advertise that someone can settle for pennies when that rarely happens. That said, the program, called IRS Offer in Compromise does help many people, and often they do you substantial reductions in the amount they owe.

    The reason most people do not see their tax debts being settled for pennies on the dollar is that the IRS compares the amount they would receive through monthly payment plans to the amount of the offer. If they would receive more through an IRS monthly payment plan they will deny the offer and want to create the payment stream to them.

    There are three main types of IRS Offer in Compromise, and choosing the correct type is critical to success. The first is for people for cant pay the whole debt-based upon their income and assets with the collection period the IRS has to collect the tax debt (typically 10 years). The second type is where you doubt you owe and want to settle. This often can happen when you’re involved in an income tax audit, and while you cant prove the IRS wrong, they actually are. The last type of offer in compromise is an effective tax administration. Under this type, you can pay in full but some other factors, such as health expenses, would make it unwise to use your money to pay in full. As discussed above, since it is not easy to have the IRS reduce your tax debt through the OIC program, it is also best to try to lower your tax bill by appealing any penalties owed and file amended tax returns if the filed return were not correctly prepared.

    To qualify for an IRS Offer in Compromise, all your tax returns need to be filed (typically the last 6 years). You also need to have correct withholding on your wages, or make correct estimated tax payments. Also, it may seem obvious but you should only offer an amount you can actually pay. Typically, once they accept you will have five months to pay the settlement amount.

    Please keep in mind that the IRS OIC Program can be very useful, but if you are successful for the next five years the IRS will monitor your tax account and if you owe again they will reverse the benefits of the OIC settlement and you will have made no progress. Therefore, while people with short term economic issues do not see benefits of the OIC program, it is also true taxpayers with long systematic financial issues are also not likely to benefit under the program.





    Attorney Timothy Hart

    Timothy S Hart, the founding partner of the tax law firm of Timothy S. Hart Law Group, P.C. is both a New York Tax Lawyer & Certified Public Accountant. His area of expertise includes innovative solutions to solve your Internal Revenue Service and New York State tax problems, including tax settlements through the Federal and New York State offer in compromise programs, filing unfiled tax returns, voluntary disclosures, tax audits, and criminal investigations. [ Attorney Bio ]