IRS Offer In Compromise

An Offer in Compromise in California is an agreement between the taxpayer and the California Franchise Tax Board (FTB) to reduce tax bills based on certain financial criteria. Our tax lawyers are based in California and are well-versed with the state’s tax laws. With our experience, we help clients who are unable to pay their tax liability by applying for the California Offer in Compromise on their behalf. We study our clients’ situations and circumstances, like their incomes, expenses, assets, and overall ability to pay.

Click here for the IRS Offer in Compromise form used by tax professionals. An IRS Offer in Compromise form is usually approved when the amount that is offered represents the most the IRS can collect within a reasonable period of time. Before submitting an Offer in Compromise, it’s a good idea to look into all of the other payment options. An Offer in Compromise isn’t necessarily for everyone. You can always choose to hire a tax professional to help you file an offer.

In order to be considered for an Offer in Compromise settlement, a taxpayer must fall under at least one of these three conditions:

We help you submit your offer as per the Offer in Compromise Booklet, Form 656-B. We create a complete package that includes all verified documents required by the IRS. Some of the documents include:

While the IRS evaluates your application for Offer in Compromise, your non-refundable payments and fees will be applied to your tax liability and any other collection activities may be suspended. A notice of federal tax lien may also be applied.

We will assist you in making all the payments that are associated with your offer to avoid delays. The legal assessment and collection period may also be extended. You will not be required to make any payments on an existing installment agreement. If the IRS doesn’t determine within two years of receipt, we confirm that your offer has been accepted.

When your offer is accepted, we will take the next step and verify that you meet all the terms listed in Form 656. We will help you apply all refunds due in the calendar year to your tax issue. We ensure that all offer terms are satisfied and specific information is publicly available to release federal tax liens.

Prior to or upon receiving approval, your initial payment can vary depending on your offer and selected payment option. Your two payment options will be:

Offer in Compromise applicants who meet the Low Income Certification guidelines won’t have to cover application fees or the initial 20% payment. Monthly payment won’t be required until the Offer in Compromise has completed its evaluation process.

Upon hearing back from the IRS that your Offer in Compromise was rejected, the taxpayer maintains the right to appeal the rejection within 30 days using the Request for Appeal of Offer in Compromise, Form 13711. Once submitted, your attorney at Victory Tax Lawyers, alongside the IRS Independent Office of Appeals, will provide you with any further assistance regarding the appeal of your rejected Offer in Compromise.

Upon having an OIC accepted by the IRS, the implications on one’s credit score might become a paramount concern. Generally, the IRS does not directly report your OIC to credit bureaus. However, tax liens, often associated with the debts being compromised under an OIC, are public records. Once the OIC is approved and the agreed-upon amount is paid, the IRS will release the tax lien, updating the public record. The release of a tax lien is typically reported to the credit bureaus and may remain on the credit report for up to seven years, potentially affecting the credit score and borrowing capabilities.

Once an OIC is accepted, the details of the agreement, including the taxpayer’s name, city, state, ZIP code, tax amount and terms of settlement, become a matter of public record. This means the information is accessible to anyone who opts to search for it, including credit agencies, lending institutions, or even general public individuals, which can sometimes be a personal concern for the taxpayer.

When an OIC is settled, taxpayers must adhere to strict compliance in their tax filings and payments for the subsequent five years. Failing to adhere to the stringent compliance terms could result in the default of the agreement, where the IRS can proceed to collect the original amount owed minus any amounts already paid under the terms of the OIC. It is crucial that individuals remain exceptionally meticulous and diligent in adhering to tax obligations post-acceptance of an OIC to prevent negating the benefits procured from the settlement.

Suspending Collection Actions

Once an OIC is submitted and is pending approval, the IRS generally suspends levy actions. This hiatus lasts until the offer is accepted, rejected, or withdrawn, providing a temporary shield against these formidable financial impacts. However, it is imperative to note that the submission of an OIC does not automatically halt wage garnishments. Specific actions or agreements must be reached to potentially suspend garnishments while an OIC is under review.

It’s a delicate balance for taxpayers to both navigate the submission of an OIC and manage existing or impending levies and garnishments. Understanding the procedural intricacies and timelines is paramount to ensure that the offer is submitted judiciously, maximizing the potential for suspension of aggressive collection actions.

In scenarios where the OIC is approved, not only is the taxpayer alleviated from the looming sword of the original tax debt, but they also circumvent further levies related to that particular debt. The approved OIC amount becomes the new obligation, which, when satisfied, nullifies the debt and associated collection actions.

Businesses, whether corporations, LLCs, or partnerships, can find themselves embroiled in tax debts that permeate through their operational and financial structures. Engaging with the OIC program can open avenues to resolve these debts, but the considerations and implications differ distinctly from individual taxpayers. Business assets, ongoing liabilities, payroll considerations, and operational costs become pivotal players in the narrative of structuring an OIC.

The OIC for a business is predicated on its ability to pay, which is calculated considering numerous variables, including:

The intersection of these elements assembles a financial picture that aids the IRS in determining what constitutes a feasible offer from the business.

Conversely, self-employed persons grapple with a unique set of financial considerations. Their personal and business finances frequently intermingle, and the Offer in Compromise (OIC) assessment process may encompass both of these realms.

Understanding and segregating personal and business debts and assets becomes crucial. The IRS will typically examine:

The OIC, in this context, becomes a balanced act, maneuvering between personal and business financial landscapes to formulate an offer that’s both acceptable to the IRS and viable for the individual.

Emotional resilience becomes a cornerstone in navigating the choppy waters of OIC negotiations, wherein the taxpayer is not negating or suppressing emotions but navigating through them with an informed and balanced approach.

Our tax experts are well-versed with the eligibility criteria for Offer in Compromise applicants. We first verify the status of our clients’ filings and payments and confirm that they are not facing any bankruptcy proceedings. The IRS has a list of other conditions to determine the eligibility of applicants; however, an Offer in Compromise is only an option if your taxes have already been assessed. At Victory Tax Lawyers, we ensure that our clients don’t miss out on any details that will affect their application.