Offer in Compromise
What is an Offer in Compromise?
An offer in compromise (or, “OIC”) is an option to resolve tax debt or debts based on either a financial inability to afford full payment or special circumstance. The three different types of offer in compromise proposals the IRS allows taxpayers to request are explained in further detail below:
OIC: Doubt as to Collectability
This is the most commonly filed and accepted type of OIC by taxpayers. Simply stated, if you can prove through disclosure of your financial information (assets, income, and monthly allowable expenses) that you cannot afford to pay the tax debt owed, the IRS could potentially agree to settle with you for the less than the full balance owed. Full financial disclosure is required in order to request and be granted approval this type of request to resolve your tax debt.
OIC: Effective Tax Administration
This type of OIC is filed when there are “special circumstances” in regard to your specific tax debt and personal situation. Perhaps this could be a serious medical issue, a natural disaster, or limited current/future income, which although you currently do have the ability to “full pay” what you owe, doing so would prevent you from a normal course of living in the future. Full financial disclosure is also required here, as well as specific information regarding your special circumstances.
OIC: Doubt as to Liability
This type of OIC is filed when you believe the IRS has incorrectly assessed a balance against you. Although financial disclosure is not required for this type of OIC because you are disputing whether or not the full amount is owed, you do need to provide evidence as to why you believe the balance is either inaccurate or incorrectly billed in order to gain approval for this type of OIC.
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