Did you know the IRS has a method to settle your overdue taxes for pennies on the dollar? If you qualify for an “offer in compromise”, often referred to as an “offer” or an “OIC,” you could potentially have the IRS settle you debt for as low as 1% of the amount you owe.
An offer in compromise is simply an offer to the IRS asking them to reduce or eliminate your tax debt for the amount of money you offer. Now that may sound a little too good to be true, but it isn’t if the IRS feels you are making a fair offer based on your current financial situation.
No taxpayer has any predetermined right to receive an offer in compromise. The process is entirely a matter of government discretion. But generally the IRS must give a properly submitted Offer in Compromise the proper consideration. Less than half of the offers submitted to the IRS are accepted. If they decline your OIC, you do have the right to take the case to the IRS Appeals Office.
So how do you submit an OIC?
In order to submit an offer you must complete IRS Form 656, Offer in Compromise. There is a $150 application fee that must be submitted with the Form 656. You may be exempt from the fee if your monthly income is below the poverty guidelines. If you claim the poverty guideline exemption, you must submit an Application Fee Worksheet from the Form 656 booklet.
Along with the Form 656 you must also include a Form 433-A. This is the form where you disclose all of your financial information to the IRS. This form must be completed thoroughly and accurately. The IRS will scrutinize this form. Your chances of getting approved for you OIC almost rest exclusively on information in the Form 433-A
If you feel you do not have the financial knowledge to fill out a FORM 433-A, it is recommended by tax professionals that you hire a competent tax adviser to fill it out for you. Submitting the financial information with inaccurate numbers will severely damage you chances of the IRS accepting your OIC.