10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for "pennies on the dollar". Check the Offer In Compromise requirements to see if it is right for you.

1. If you are unable to pay a tax debt in full, if the taxpayer establishes to the satisfaction of the IRS that he either: has no means of paying the tax, or does not actually owe the tax--and an installment agreement cannot be worked out--the IRS strives to resolve the taxpayer's tax debt.

2. Under certain circumstances, you may be able to take advantage of the offer in compromise (OIC), but there are hurdles to overcome before the Internal Revenue Service accepts less than full payment. To date, taxpayers who have gone through the Offer in Compromise program to settle their tax bill have saved millions of dollars.

3. An OIC delinquent tax settlement is an agreement taxes owed for less than the full amount of taxes due. It's a complex decision and a tax attorney is needed for his extensive expertise in planning, preparing, negotiating and even appealing rejections.

4. IRS Code Sec. 7122 gives the IRS power authority to settle--compromise--federal tax liabilities. Exceptional circumstances sometimes exist that allow the IRS to consider an OIC program for the taxpayer. For example, a taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

5. Very few offers were accepted in the past, because the standards were almost impossible to meet before a tax debt was legally compromised. Recent tax legislation has given new hope to taxpayers who were previously disqualified.

6. In the past the IRS really did not want to encourage OIC's. Prior to 1992 the IRS has been reluctant to settle tax liabilities, but with mounting uncollected taxes, the IRS has decided to go easy on the growing number of cases it sees.

7. Today, the OIC program is one of the best tax resolution tools available to taxpayers. The IRS will accept an OIC when it looks unlikely that the taxes will be collected; but before that happens a good tax person must know and carefully navigate virtually every key regulation involved.

8. After all taxpayer avenues are explored and different available payment options are reviewed, the IRS makes a "business" decision: they want to collect a partial payment rather than nothing at all. The IRS is thinking, "Is there is doubt that the taxpayer will ever pay the full amount of tax owed?"

9. An OIC amount "offered" by the IRS is the amount that they feel that they can reasonably expect to collect after reviewing-- and exhausting--the taxpayer's ability to pay. The IRS weighs the doubt as to liability and doubt as to whether the tax assessed is correct.

10. Beware of advertisements they claim to settle tax debts for "pennies on the dollar", allowing taxpayers to settle their taxes for less, or often much less than you owe (or what the government claims you owe). The IRS resolves less than one percent of all balance due accounts through an OIC agreement.

Kirt Durst
Dedicated to offering news, articles, and instruction on tax. You have a definite choice in organizing your financial affairs. Visit http://www.aidtax.com for more information.

In The News:

California’s Tax-the-Rich Boomerang  The Wall Street Journal
Ranking the States on Taxes  National Review

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

How To Get An Instant Pay Raise

As a gentleman was leaving my class recently, he wanted... Read More

The Annual Gift Tax Exclusion: Getting The Edge

Whether helping the kids with a down payment on their... Read More

Navigating The Internet Sales Tax Laws

QUESTION: I have been contacted by my local city... Read More

10 Tax Tips to Reduce Costs and Increase Income

No one likes paying tax. Everyone understands that tax is... Read More

10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for... Read More

Requirements To Produce Tax Information (Whats Up With That?)

"What we've got here is a failure to communicate." ... Read More

2005 Ford Escape Hybrid Certified For Clean-Fuel Deduction

If you are environmentally conscious and purchase a 2005 Ford... Read More

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made... Read More

Correspondence From The IRS ? Yikes!

It's a moment every person dreads. You pick up the... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

IRS Reports Tax Gap of $300 Billion

The Internal Revenue Service is reporting that the difference between... Read More

IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters

The IRS has obtained civil injunctions against more than 100... Read More

Alas! In E-Commerce Taxland

In trying to comply with tax laws for your e-business,... Read More

Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane

Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

Taxation of Forgiven Debt: The 1099C & You

Often people fall on hard times and stop paying on... Read More

Taxing Overseas Firms for SOX Compliance

The Sarbanes-Oxley Act, also called the Public Company Accounting Reform... Read More

How to Cut Duty Cost and Increase Profit as an Importer

Import duties continue to be significant elements in the cost... Read More

IRS Certifies 2006 Toyota Hybrid for Clean Fuel Deduction

The Internal Revenue Service has certified the 2006 Toyota Highlander... Read More

Home Based Business Tax Deductions

Running a home based business reaps many wonderful tax deductions... Read More

Your IRS Tax Appeal Rights

Are you in the middle of a disagreement with the... Read More

Income Tax Returns Your Accountant Should Not File

You've been feeling uneasy (perhaps even guilty) because you've failed... Read More

Tips and Simple Guidelines on How to Calculate Payroll Taxes

Managing a business small, medium or big requires you to... Read More

Marriage or Divorce ? Check Your Social Security Number

Newlyweds and the recently divorced should make sure that names... Read More