WHAT IS AN OFFER IN COMPROMISE?
An Offer in Compromise (OIC) is a settlement agreement with the IRS or state taxing agency. It allows you to make a payment - called a lump sum settlement - for an amount less than what you owe the IRS. The first part of the OIC process takes a close look at your income and expenses to determine if you will qualify. Many of the folks on TV and the radio tout the OIC - but most often, they will deliver you into a structured payment plan with the IRS (which is something different). Safe Harbor will fight for a settlement for you, explain your chances as well as the possible outcomes. We can usually determine if an OIC is a viable option before you sign on with us.
One of the keys to success is to submit the OIC ahead of the IRS sending you to collections. Once you are in the collections process, it requires us to contact the IRS to stop collections and allow them to analyze the offer. The TV guys will often skip this simple step. That approach means your garnishments and levy will continue - as the OIC department and collections department are separate.
The IRS allows for two separate Offers In Compromise: Doubt as to Collectability and Doubt as to Liability.
DOUBT AS TO COLLECTABILITY
This offer is made when you can't pay, and don't have income, assets or prospects of them to pay your tax assessment.
In order to qualify for this type of IRS settlement, usually the taxpayer needs to meet the following limitations:
- 80% of the net value of your assets (after secured loans) do not exceed the total amount of tax due.
- Using IRS guidelines, you will have little or no disposable income at the end of a month.
- The tax assessment didn't arise from cashing out a qualified retirement account or selling an asset resulting in capital gains income and not paying the taxes.
The rule for #3 is the "dissipated assets rule" - and the IRS looks and would say you HAD the money when you sold the asset or cashed out the retirement to pay the taxes, and you spent it - so they won't settle with you. As with any settlement, there is some room for negotiation here - and we will use all the resources available to get you the best result.
DOUBT AS TO LIABILITY
A Doubt as to Liability is a situation where you may have been assessed a tax liability but it isn't yours. For instance, perhaps you were personally assessed a Trust Fund Penalty, but had nothing to do with the remittance of the payroll taxes. In this case, we will prepare a comprehensive case and show good cause as to why you would not be liable. These are very hard to get, and require a fair bit of effort. However, they are not income or asset dependent.
DO I QUALIFY FOR AN OFFER IN COMPROMISE?
One of our tax attorneys will review your case and advise if this approach is best for you. Just fill out the form below to set a free initial consultation.