What to know about an IRS Offer in Compromise (OIC)

Date: July 20, 2023

What is an Offer in Compromise?

An Offer in Compromise (OIC) is a way to settle your tax debt with the IRS for less than the full amount that is owed. The offer given to the IRS should represent the most you are able to pay on your outstanding tax debt within a reasonable amount of time. After your offer is drafted and submitted to the IRS, the IRS is given the chance to either accept or deny the offer.

 

Who qualifies for an Offer in Compromise?

This option might be available to taxpayers who cannot pay their full amount of tax debt or if doing so would create severe financial hardship. The IRS considers each offer individually and considers information such as: your ability to pay your debt, your income, your expenses, and your asset equity. Other options, like a payment plan, should be considered first before submitting an offer in compromise.

 

What can I do to receive an Offer in Compromise?

To be eligible for an Offer in Compromise, you must have filed all of your required tax returns. You will need to complete an OIC booklet, which includes a Form 433-A and a Form 656, as well as any documents required by these forms. If you qualify as a low income taxpayer, there is no fee for submitting an OIC booklet. The OIC booklet is very detailed and can be difficult to navigate. Please reach out to the Indiana Legal Services Low Income Taxpayer Clinic if you would like to explore this option. Our attorneys are experienced in completing these documents.

 

Something to be aware of: Scams

You should be aware of scams that offer to help you draft an Offer in Compromise to submit to the IRS. The people behind these scams often charge high rates to draft these forms and may not even end up completing or submitting the forms for you. Instead, reach out to the Indiana Legal Services Low Income Taxpayer Clinic to see if you would be a good candidate for this type of relief.

 

For more information, visit:

https://www.irs.gov/payments/offer-in-compromise

https://www.irs.gov/newsroom/dirty-dozen-watch-out-for-offer-in-compromise-mills-where-promoters-claim-their-services-are-needed-to-settle-irs-debts

If you have questions or would like to consult with an attorney, contact the Indiana Legal Services Low Income Taxpayer Clinic at tax.clinic@ilsi.net or (812) 339-7668.

Claire Thiel,
Low Income Taxpayer Clinic Law Clerk

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