IRS Offer in Compromise: Settling Taxes for Less
An IRS Offer in Compromise is an IRS program that allows a taxpayer to make an offer for less than the total amount owed. If the IRS accepts the offer, you pay less than you owe, and the IRS wipes clean the rest of the taxes owed. After your payment, you are in good standing, and you don’t owe anything else. However, you will need to stay in tax compliance for five years going forward.
To take advantage of this program, you have to submit an offer. The IRS will only accept an offer if they feel that your offer is equal to or greater than the amount they would ever collect from you, even if they used enforced collection actions (garnishment, or levies).
The IRS rejects most offers as only 40.7% were accepted in 2018. Generally, you can only get approved if you have serious financial issues. Therefore, check out the following links for more details on this tax settlement option.
You must meet certain requirements to qualify for an Offer in Compromise. Additionally, there are three main situations where you might qualify.
Requesting an IRS Offer in Compromise requires a lot of paperwork. Furthermore, you must file everything correctly if you want your offer to be approved.
The IRS only accepts offers if they are for more than the IRS would get in any other situation. In other words, your offer needs to be more than the IRS could collect through wage garnishment or seizing assets.
If the IRS accepts your Offer in Compromise, there are two main payment options. You can choose the method that works best for your situation.
Answers to the most common questions about the IRS’s OIC program.
Check out the reasons why an IRS Offer in Compromise may be rejected, and learn how to appeal a rejection.
As of November 1, 2021, the IRS has updated its OIC policies to make the process easier for taxpayers. In the past, the IRS kept tax refunds from taxpayers who had been approved for an OIC in the same calendar year. For example, if someone was approved for an OIC on their 2017 and 2018 taxes in 2020 and they earned a refund when they filed their 2020 tax return, the IRS had the right to keep that refund.
Under the new rules, the IRS will no longer keep these refunds. Additionally, if a taxpayer is experiencing financial hardship, the IRS will not keep refunds while the taxpayer's OIC application is pending. However, taxpayers must notify the IRS if they want to keep refunds while their offer is pending.
State Offer in Compromise
Each state agency has its own tax resolution solutions. Some states offer a version of an offer in compromise program similar to the IRS while some do not offer at all. Below are some details on various states that do offer an offer in compromise program.
- Arizona Offer in Compromise
- Arkansas Offer in Compromise
- California FTB Offer in Compromise
- Colorado Offer in Compromise
- Connecticut Offer in Compromise
- Georgia Offer in Compromise
- Illinois Offer in Compromise
- Indiana Offer in Compromise
- Maryland Offer in Compromise
- Michigan Offer in Compromise
- Minnesota Tax Compromise
- Mississippi Offer in Compromise
- Missouri Offer in Compromise
- New Jersey Closing Agreement
- New York Offer in Compromise
- North Carolina Offer in Compromise
- Ohio Offer in Compromise
- Pennsylvania Tax Forgiveness
- South Carolina Offer in Compromise
- Tennessee Offer in Compromise
- Virginia Offer in Compromise
Licensed tax professionals (EA, CPA, or Tax Attorneys) can prepare all the documents you need for an Offer in Compromise. They can help you negotiate a settlement where you pay less than you owe. If you are looking for a list of tax professionals with an offer in compromise experience, you can find experienced tax professionals here, or you can start your search below.
Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific advice regarding your tax situation, contact a licensed tax professional or tax attorney.