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IRS Offer in Compromise Tool

Offers in Compromise (OIC) offers taxpayers an option to resolve their tax debt for less than the amount owed. The Internal Revenue Service (IRS) website has a new tool to help determine if a taxpayer is eligible for an OIC and calculates a preliminary offer amount.  Taxpayers will need to enter asset, income and expense information to generate a proposal an offer. If eligible, taxpayers must complete an OIC application.

The IRS states:

We make our final decision based on your completed OIC application and our associated investigation. This tool should only be used as a guide. Although it may show you can full pay your liability, you may still file an offer in compromise and discuss your individual financial situation with the IRS.

In 2012, the IRS announced more flexible OIC terms to assist financially distressed taxpayers. These changes are part of the “Fresh Start” initiative, an IRS program designed to put in place “common-sense” changes that more closely reflect “real-world situations.”

Accounting Today reports:

The number of requests for offers increased by 28 percent between fiscal years 2007 and 2011. At the same time, the resources available at the IRS to work on the offers have decreased, creating an inventory backlog and delaying responses to taxpayers. The new OIC pre-qualifier tool could help the IRS reduce this backlog by encouraging taxpayers and tax practitioners to do the work ahead of time to determine whether an offer in compromise is worth pursuing.

Paul Reska, an Enrolled Agent at McMahon & Associates and 20-year veteran of the IRS with extensive experience in Offers in Compromise, said “This is a useful tool for taxpayers who are considering submitting an OIC.”

Additional Information

IRS website: IRS’s Form 656 Booklet

IRS Offer in Compromise: Pre-Qualifier Tool

Accounting Today: Article

Boston Tax Attorney Blog: IRS Announces More Flexible Offers in Compromise (OIC) Terms