Jo Willetts, EA
Director, Tax Resources
Updated on: July 12, 2022
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The IRS offer in compromise (OIC) allows qualified taxpayers to settle their tax bill for less than they owe.
Tip: If you have equity in a car, homes, or investments worth more than you owe, you won’t qualify for an OIC, because the IRS would decide that you can pay your tax bill with those assets.
The most important qualification criterion is that you can’t pay the IRS due to your hardship.
If you don’t meet all items on that list, the IRS will automatically reject your OIC. This means that your net equity in assets plus the amount that you could pay in monthly payments is significantly less than the taxes you owe.
To properly file an OIC, make sure you send the IRS a complete application. Your application and supporting documents should clearly show why an OIC is the right choice for your situation. Keep in mind that since the IRS approves only a third of these applications, it’s a great idea to get the help of knowledgeable professionals such as Jackson Hewitt’s Tax Resolution Specialists.
At a minimum, your application must include:
Jackson Hewitt’s Tax Resolution Specialists are familiar with the complex requirements of the OIC process and can help manage the review, submission, and appeals process to increase the chances of getting your OIC application approved.
The IRS offers two payment options to pay your OIC offer amount:
Exceptions: If you meet the low-income certification requirements, you don’t have to pay the application fee, any down payments, or anything while the IRS considers your offer.
If the IRS rejects your OIC application, you still owe your original tax debt plus all interest and penalties. The IRS will apply any payments you already made (such as in your OIC offer) to your tax bill. You’ll have 30 days to appeal this decision using a Request for Appeal of Offer in Compromise Document (Form 13711).
The IRS Independent Office of Appeals can help you with appealing a rejected offer. It is also a good idea to seek the help of a tax professional when applying for, or appealing, an OIC decision.
About the Author
Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 25 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.
There are few things more concerning than owing the IRS money. Unexpected debt is a problem millions of Americans face. When it comes to tax debt, you have several options, including an IRS payment plan.
You might have heard about how it is possible to settle your IRS tax debt for less than the amount you owe. While the IRS won’t let you off easy, there are some circumstances where you might be able to qualify for an offer in compromise (OIC).