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Offer in Compromise

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service. This agreement settles the taxpayer’s tax liabilities for less than the full amount owed.

In most cases, the IRS will not accept an offer unless the taxpayer offers an amount that is equal to or greater than the reasonable collection potential (the RCP). The RCP is how the IRS measures the taxpayer’s ability to pay.

The RCP includes the value from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. In addition to the property, the RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.

The IRS may accept an Offer based on three grounds:

  • If there is doubt as to liability, the IRS will accept the offer. A taxpayer only meets this ground when genuine doubt exists that the IRS has correctly determined the amount owed.
  • They will also accept the offer if there is a doubt that the amount owed is collectible. This means that doubt exists that the taxpayer could ever pay the full amount owed.
  • The IRS will accept the offer based on effective tax administration. When there is no doubt that the liabilities have been correctly determined, the IRS will accept the offer. This also applies when there is no doubt that they can collect the full amount owed. But because of exceptional circumstances, requiring payment in full would either create an economic hardship or would be unfair and inequitable.

When will the IRS not Accept An Offer in Compromise

If the liabilities can be fully paid through an installment agreement, the taxpayer will likely not be eligible for an OIC. Even if paid by other means.

Taxpayer Rescue has over 30 years of experience in preparing successful OICs. If you believe you may qualify for an Offer in Compromise, call us now for a consultation at 602-123-4567.

You also have the option to complete our contact form here → Contact Us. Be sure to describe your situation in detail and a tax professional will contact you soon.