The Impact of an OIC on Tax Liens and Levies

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.