| Rarely, when resolving your Tax Debt, the IRS or | | | | amount less then what he or she owes. Sometimes, |
| Internal Revenue Service may accept an "Offer In | | | | the taxpayer's total liability can be wiped clean if: |
| Compromise" (OIC). An OIC is contract or agreement | | | | 1."Doubt as to Liability" - the IRS is not sure if the total |
| between the taxpayer or tax debt holder and the | | | | tax liability is accurate |
| Internal Revenue Service (IRS). This agreement usually | | | | 2."Doubt as to Collectibility" - the IRS doesn't think total |
| results in both sides (i.e. IRS and the liable taxpayer) | | | | tax amount owed can be paid by taxpayer |
| coming to a resolution on the total amount due. It may | | | | 3."Effective Tax Administration" - IRS is certain of |
| be difficult to tackle this option alone as you can find | | | | taxpayer's total liability and ability to pay, but under |
| many professional tax experts who can help you not | | | | special circumstances considers an OIC. An OIC only |
| only with an Offer In Compromise, but decide whether | | | | becomes a reality if the taxpayer can reason that the |
| it is right for you. | | | | tax liability will create financial problems for them and |
| An Offer In Compromise becomes a viable method in | | | | therefore is unfair and unjust. |
| resolving tax debt when payment in full or installment | | | | Typically with an OIC, you must determine what is |
| payment plans are not possible methods of tax debt | | | | reasonable for the IRS to collect. In order to submit the |
| consolidation. It is recommended that you do not | | | | OIC, the revised (Feb 2007) Form 656-L must be filled |
| explore this option unless all other options have been | | | | out when "Doubt as to Liability" is the case. When |
| ruled out as about one percent of all tax disputes are | | | | "Doubt as to Collectibility" is the case then Form 656 |
| resolved through OICs. Remember, the IRS expects | | | | should be filled out. One change that has taken effect |
| you to pay the full amount in the shortest amount of | | | | is that taxpayers are no longer to simultaneously file |
| time. When submitting the offer, the amounts and the | | | | offers for bullet points "A" and "B" above. Furthermore, |
| due dates must be specified on form 656 (link below). | | | | if a taxpayer submits an OIC for a tax year or period |
| An Offer In Compromise can be beneficial for the tax | | | | that has not assessed, the IRS will notify the taxpayer |
| payer as usually the agreement results in the IRS | | | | that the OIC cannot be considered. |
| "settling" or "compromising" with the taxpayer on an | | | | |