Using the Offer-in-Compromise

Taxpayers are not the only ones who have had to significantly adjust due to COVID-19 and the countless effects of that pandemic. IRS operations were severely hampered for several months. Now that many agencies seem to be getting back on their feet, the IRS is once again focused on collecting taxes owed by taxpayers. Though there have been myriad federal and state relief programs, many taxpayers will still have difficulty paying their tax liabilities due to the drastic economic downturn. 

For individuals and businesses in this situation, the IRS offers a program called the Offer in Compromise – Doubt as to Collectibility (OIC). The OIC gives taxpayers a chance to get back in the IRS’ good graces in exchange for paying back at least some of the money they owe. The program, unfortunately, is not for anyone who does not want to pay their full tax liability.  It is what the IRS believes it can collect – based on an individual taxpayer’s ability or inability to pay in full based on their specific assets, monthly income and expenses. 

Determining Your Eligibility

You will generally not be able to enjoy an OIC if any of the following apply to you:

  • You have an open bankruptcy filing
  • You have not filed your latest federal tax return
  • You have not made estimated tax payments
  • You have not submitted federal tax deposits (if you are self-employed and have employees)
  • The IRS has referred your case to the Department of Justice
  • You are involved in an open audit or innocent-spouse relief claim

If none of the above disqualifiers apply to you or your business, your eligibility is not yet secure. You must also show that one of these conditions also applies: 

  • Doubt as to collectibility – Based on the amount of your assets and income, the IRS does not believe it will collect the full amount tax bill. 
  • Paying your tax bill in full would create an “economic hardship” for you.
  • The IRS’ collecting your tax bill would be “unfair” and “inequitable.”
  • Doubt as to liability – The amount the IRS claims you owe is inaccurate. This is quite rare.
Which Forms Do You Need?

Your attorney will let you know the specific documentation you need to submit for your application, but you will need Form 656 and Form 433-A OIC (Form 433-B for businesses). Form 433-A OIC requires you to provide to the IRS a substantial amount of information about your personal finances. You will also make an initial offer, which should not simply be the amount you wish to pay, but is based on your current economic situation as set forth on the IRS Form 433-A OIC. If your application is approved, you can make either a lump-sum payment or periodic payments. 

If your application for OIC is rejected, you have 30 days to appeal the decision. It’s important to have an experienced tax attorney look over your application before you file so you are in the best position. It is, arguably, more important to have legal counsel while appealing an OIC rejection. 

Weisberg Kainen Mark has handled countless OICs over the years. Believe it or not, the IRS does offer many relief programs for taxpayers. Our firm would be honored to help you figure out your current tax situation. Call our office at 305-374-5544 to discuss your options.

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Weisberg Kainen Mark, PL

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