If you’re facing a large tax bill with the IRS but lack both the means and the assets to satisfy your debt, the Offer In Compromise (OIC) is one option to consider.
The OIC program allows you to pay a lesser amount while permanently settling your tax account.
You’ll first need to complete IRS For 433-A, in which you’ll need to fill out completely. The IRS will take the following into consideration when evaluating your request for the OIC program:
- Ability to pay
- Income and expenses
- Overall value of any existing assets
It’s a good idea to utilize the IRS’s pre-qualifier tool before completing the OIC packet. You’ll gain a clearer understanding if the OIC program is suitable for you.
If you decide to move forward with the program, you will need to submit the following:
- Your completed 433-A form, along with IRS Form 656.
- The $186.00 application fee, along with your initial payment.
If you meet the Low Income Certification guidelines (refer to your OIC booklet for guidelines), you are exempt from both the application fee and the initial payment while the IRS evaluates your application package.
If you are required to make an initial payment, it will vary based on the payment option you choose:
Periodic Payment: Submit your initial payment along with your application packet, and continue to pay toward the remaining balance in monthly installments while the IRS evaluates your case. If your OIC proposal is accepted, continue with the monthly payments until your balance is paid in full.
Lump sum cash: Submit an initial payment of 20 percent of the proposed balance under the OIC proposal, in addition to your completed application packet. Wait for the IRS to make a determination, and pay the remainder in five or fewer payments.
By understanding the OIC process, you will get a clearer picture of your options in the face of a sizable tax bill.
Not sure if the OIC program is for you? We have licensed tax professionals on staff who can assist you and answer your questions.
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You don’t have to face a large tax bill by yourself. We’ll help you get the resolution you need and within a timeframe you can live with.