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What is an offer in compromise?

On Behalf of | Jan 11, 2021 | Uncategorized |

Every tax season, people from Washington to Florida will either make mistakes on their taxes or deliberately ignore paying them altogether. The IRS will take legal steps to ensure that you pay what you owe to the government. In fact, not paying may even lead to a prison sentence. Fortunately, you do have an option that can help you avoid all this, and that is by accepting an offer in compromise.

What do you need to know about an offer in compromise?

There is a section within U.S tax law that allows a person to accept an offer in compromise. This means that the individual in debt is allowed to pay back the IRS a portion of the amount owed. This option is usually accepted by the IRS but only if it’s a number that the organization can collect within a reasonable period of time.

Making sure you’re eligible

Before you file an offer in compromise, or OIC, it is important to know how to proceed. The first thing to do is make sure that you have filed and sent your recent tax returns to the IRS. Next, make sure that you have given some payments to the IRS as you are only allowed to file for an OIC if you have made an effort to pay what you owe.

Deciding how you will pay

If your OIC has been accepted, you will then be offered two options to pay back what you owe. These include a lump sum and a periodic payment. A lump sum requires that you pay 20% of the accepted payment, and the rest you may pay over the course of five payments or less. A periodic payment simply means that you pay a predetermined amount each month until your debt has been paid off.

Filing for an OIC can be a complex process and one that you do not want to make mistakes on. It is recommended to bring on an experienced tax attorney to help you through the process.