Offer In Compromise (OIC)

When dealing with tax liabilities and inability to pay the full amount owed, one option available to taxpayers is an OIC, which stands for an Offer In Compromise.  An Offer In Compromise (aka Offer) allows taxpayers to settle tax debt for less than the full amount owed. An Offer In Compromise is also an option for those taxpayers for who paying the liability would create a financial hardship.  The IRS usually performs their version of a means test by reviewing your financial information via Form 433-A (OIC), which compares a taxpayers Income to Expenses and Assets to Liabilities.  If a taxpayer can pay a certain amount (an Offer In Compromise) within a reasonable period of time (Reasonable Collection Potential), then the IRS OIC Unit or Appeal Unit may agree to such.
 
There are other times when the IRS accepts an Offer In Compromise based on Special Circumstances, which include but are not limited to a serious illness.  The IRS however does encourage taxpayers to explore all other payment options before submitting for an Offer in Compromise as this option is not for everyone and filing such can at times look like a delay in the collection process.  It’s best therefore to make sure you are eligible for the OIC before filing for it.  One way to check for eligibility before considering an Offer is by using the Offer in Compromise Pre-Qualifier tool, which is a free tool available on the IRS website.  One must also be current with all filing and payment requirements, such as estimated tax payments for the current year. Lastly, one will also not be eligible if you are in an open bankruptcy proceeding.
 
As you can see, there are lots of things to consider before filing for an Offer In Compromise. Therefore taxpayers are encouraged in seeking help of a qualified professional, preferably someone who specializes in this area and not just a general practitioner – whether an Attorney, a Certified Public Accountant (CPA), or an Enrolled Agent (EA).