Navigating the complexities of an Offer in Compromise (OIC) with the IRS can be challenging, but it’s a viable option for those struggling with tax liabilities. An OIC enables you to settle your taxes for less than what you owe, offering financial relief if you are unable to pay your tax debt in full or if full payment would cause significant economic hardship.

Eligibility for an Offer in Compromise

To be considered for an OIC, you must demonstrate one of the following circumstances to the IRS:

• Insufficient Income and Assets: Showing that your income and assets are inadequate to cover the full amount of taxes owed.
• Hardship and Fairness: Demonstrating that paying the full amount would result in economic hardship or would be unfair or inequitable under your specific circumstances.

Qualification Criteria

The IRS evaluates each OIC application on a case-by-case basis, considering all aspects of the taxpayer’s financial situation, including:

• Income
• Expenses
• Asset Equity

These factors help determine the feasibility of the proposed compromise and ensure that it serves the best interest of both the taxpayer and the IRS.

Payment Options for an Offer in Compromise

The IRS provides two payment structures for settling a debt through an OIC:

1. Lump Sum Offer: You pay 20% of the total offer amount upfront and the remaining balance in five or fewer payments within five months after the IRS accepts the offer.
2. Periodic Payment Offer: You make the first payment with your application and complete the rest over 24 months or less, according to the agreed terms.

Steps to Take Before Applying

Before submitting an OIC, ensure that you have:

• Filed all required tax returns.
• Made all required estimated tax payments (for individuals) or federal tax deposits (for business owners with employees).

Approval Chances

While the IRS has a stringent review process, and the acceptance rate for OICs is relatively low, proper preparation and a complete, error-free application increase your likelihood of approval.

How Clear Start Tax Can Help

At Clear Start Tax, our team of tax professionals and licensed experts specialize in navigating the Offer in Compromise process. From your initial consultation to the final resolution of your tax issues, we’re with you every step of the way, ensuring the best possible outcome. Contact us today for a free consultation to learn how an Offer in Compromise could be a viable solution for your tax problems.