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The Impact of an OIC on Tax Liens and Levies

Offer In Compromise

The Impact of an OIC on Tax Liens and Levies:

  • Temporary Relief from Tax Liens and Levies: When you submit an Offer in Compromise (OIC) to the IRS, it typically initiates a temporary pause on the enforcement of tax liens and levies. This gives you some breathing room to negotiate a settlement.
  • Preventing Property Seizures: If you have an outstanding tax debt and are facing potential levies on your bank accounts or wage garnishments, filing an OIC can halt these collection actions while your offer is under review.
  • Tax Lien Remains During Review: While an OIC is being considered by the IRS, any existing tax liens on your property or assets remain in place. However, the IRS generally won’t initiate new liens or levies during the review process.
  • Potential Lien Discharge: If your OIC is accepted, and you fulfill the terms of the agreement, the IRS may discharge certain federal tax liens associated with the debt. This allows you to regain control of your property and assets.
  • Release of Levies: If your OIC is accepted and you’ve made the required payments, the IRS should release any existing levies on your bank accounts or wages as part of the settlement.
  • Maintaining Compliance: It’s essential to remain in compliance with your tax obligations throughout the OIC process. Failure to file returns or pay taxes during this time can lead to the rejection of your offer.
    Credit Implications: While an OIC can provide relief from immediate collection actions, it may impact your credit score and financial history, similar to a bankruptcy filing. Be aware of potential credit repercussions.
  • Review and Negotiation: The IRS carefully reviews and may negotiate the terms of your OIC, including the proposed settlement amount. Consulting a tax professional or attorney can help you navigate this process effectively.
  • Accepted OIC and Fresh Start: Successfully completing an OIC can provide a fresh start, allowing you to settle your tax debt for less than the full amount owed and regain control of your financial future.

It’s crucial to understand that not all OIC applications are accepted by the IRS. The process can be complex, and eligibility requirements are stringent. Consulting with a tax professional or attorney experienced in tax debt resolution can help you determine whether an OIC is a viable option for your specific tax situation and guide you through the application process.

Frequently Asked Questions

What is an Offer in Compromise (OIC), and how does it relate to tax liens and levies?

An Offer in Compromise is a program offered by the IRS that allows taxpayers to settle their tax debt for less than the full amount owed. It can have a significant impact on tax liens and levies because if accepted, it can help resolve these issues.

Can an OIC prevent a tax lien from being filed against me?
In some cases, yes. When you submit an OIC, the IRS generally suspends its collection activities, including the filing of tax liens and levies, while your offer is being evaluated. If your OIC is accepted and you fulfill the terms of the agreement, the IRS may release any existing tax liens.
What happens to an existing tax lien if my OIC is accepted?
If your OIC is accepted and you meet the agreed-upon terms and conditions, the IRS may issue a Certificate of Release of Federal Tax Lien. This certificate removes the lien from your property and credit reports.
Can an OIC stop an IRS levy or wage garnishment?
Yes, submitting an OIC typically stops the IRS from levying your bank accounts, wages, or other assets while your offer is under consideration. If your OIC is accepted, the IRS will release any existing levies.
What if my OIC is rejected? Will I still have tax liens and levies to deal with?
If your OIC is rejected, the IRS can resume collection activities, including filing or enforcing tax liens and levies. However, you have the option to appeal the rejection or explore alternative payment arrangements.
Can I negotiate with the IRS regarding the release of tax liens or levies as part of my OIC application?
Yes, you can negotiate with the IRS regarding the release of tax liens and levies as part of your OIC application. However, it’s essential to provide strong reasons and documentation to support your request.
What is a Notice of Federal Tax Lien, and how does it impact me?
A Notice of Federal Tax Lien is a public notice filed by the IRS to inform creditors and others that you owe back taxes. It can negatively affect your credit score and make it difficult to obtain credit or sell property.
How long does it take for the IRS to release a tax lien after my OIC is accepted?
The timing of the release of a tax lien can vary, but it generally occurs after you’ve fulfilled the terms of your OIC. Once the IRS is satisfied with your compliance, they will issue a Certificate of Release of Federal Tax Lien.
Should I seek professional assistance when dealing with tax liens, levies, and OIC applications?
Yes, it’s often advisable to work with tax professionals, such as tax attorneys or enrolled agents, when dealing with tax liens, levies, and OIC applications. They can provide guidance, negotiate on your behalf, and help you navigate the complex process effectively.

Dealing with tax liens and levies can be challenging, but an OIC can offer a path to resolution. Seeking professional help is often the best way to ensure the most favorable outcome for your specific situation.

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