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IRS Offer in Compromise - Tax Settlement

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Tax Settlement Program -
IRS Offer in Compromise

When you owe more federal income tax debt than you can realistically pay, you may qualify for the best tax settlement option. The ultimate tax settlement is an IRS Offer in Compromise.

While IRS payment plans or installment agreements can help you pay your full tax debt over time, if you can afford it, an Offer in Compromise (IRS Settlement) is about as close as anyone can come to total IRS debt forgiveness. The IRS will never take "zero" dollars but they will take as little as $100. 

A tax settlement is predicated on how much money and assets you have after deducting what the IRS calls "allowable expenses." Allowable expenses are your everyday living expenses. Another factor is the "Statute of Limitations" which is the remaining time the IRS has to collect your tax debt?

KNOW THIS: The IRS will always focus on 2 things. Collect money and close cases. An Offer in Compromise accomplishes both of these goals for the IRS even if the tax settlement is only $100. Side note: Not everyone is able to settle for $100.


Let’s cover an Offer in Compromise so you can understand how you might be able to settle a tax debt for less than the full amount you owe.

Applying for an Offer in Compromise

If you have reason to believe that you could qualify for a tax settlement through an Offer in Compromise, you should take a look at the Offer in Compromise Booklet and Form 656. If you feel overwhelmed and IRS help is needed, consider hiring a tax professional who will prepare all of the documents necessary for a successful tax settlement.

How is the offered tax settlement determined?

An IRS Offer in Compromise starts with you, the taxpayer, making a valid tax settlement offer to the IRS by using Form 656 — but you can’t just offer any amount you wish as an IRS settlement for your tax debt.

The IRS expects the amount you offer to be equal to or greater than the value of your assets — real property, vehicles, and bank accounts — as well as anticipated future income minus basic living expenses (allowable expenses). The IRS terms this your “reasonable collection potential (RCP).”

You do not be "destitute" to be eligible for an Offer in Compromise. The IRS "allowable expenses" includes housing, car payment (2 if you are married), health insurance, utilities, food and clothing, alimony, child support, secured loan payments, term life insurance, etc.


To determine your ability to pay your outstanding tax debt, the IRS may require you to complete and submit Form 433-A. The form gathers details of a wage earner’s or self-employed person’s financial situation, including a taxpayer’s assets and expenses.

When it comes to figuring out your IRS Offer in Compromise, there may be a lot of math involved.

The IRS will examine your financial picture and your ability to pay, and then they’re going to look at their ability to collect.

The number one reason that the IRS rejects a tax settlement is that the taxpayer decided to do their Offer in Compromise themselves. Don't compound your tax debt problems by attempting to do a tax settlement. The IRS approves approximately 42% of every tax settlement submitted.





Frequently Asked Questions - Offer In Compromise

How Can I Do An IRS Offer In Compromise?

Review your tax debt (tax liability) to make sure that you owe it. If you made a mistake on a tax return, amending that tax return may eliminate the tax debt. There are other Tax Relief Programs that may be easier and less time consuming. These other tax relief options such as entering into an Installment Agreement or being declared Currently not Collectible will close your file but penalties and interest will continue to be added to your tax liability. Only a successful Offer in Compromise will totally settle your debt at a small fraction of what is owed. If you think you can "Do It Yourself" (DIY), you can go to the IRS website and check their " Pre-Qualifier." If you want a quick answer as to whether or not you should submit an Offer in Compromise, give our team a call at 1-866-747-7435. the consultation is free and has no obligation. Our counsultations will take only 20 to 30 minutes of your time. At the end of our conversation, you will know if an Offer in Compromise is the right way to go.

How Will An Offer In Compromise Affect Me?

To begin with, submitting an Offer in Compromise will stop all IRS enforcement actions altough the IRS may file tax lien while the process continues. If your settlement offer is accepted, the tax lien disappears. There is a $205 Offer in Compromise filing fee. This filing fee is non-refundable. An Offer in Compromise will take 10 to 12 months to complete the process. Your Offer in Compromise may not be " processable." What does that mean, you may ask. Well the first part of the process is your OIC paperwork is sent to one of two locations. One is in Tennessee and the other is Long island, NY. At these two IRS facilities, the agency is looking for errors in your paperwork. Should they something wrong, the IRS will send it back as a rejection. The IRS is looking for reasons to say no to your settlement application. Most OIC rejections are during this time.

Should they find something "not quite right," the IRS will reject it.The agency will label it "non-processable" and will not tell you what you did wrong. In other words they will "nit-pick" the Do It Your-Selfers. Having an experienced Tax Attorney will eliminate these types of problems and rejections. The initial process takes approximately 5 months. Once it gets past "the gatekeepers" the OIC goes to an Examiner who will make the final decision. If all of the numbers are correct, you should be very happy will the result.

What Is My Best IRS Settlement Option?

The very best thing you can do is this, engage an experienced Tax Attorney to get you through the entire Offer in Compromise process. You do not need to pay an "arm and a leg" to receive a successful Offer in Compromise ( IRS settlement). FYI the tax professionals at Flat Fee Tax Relief have a 96% success rate. Our team knows a good Offer in Compromise from a bad one. We will never lie to you. The IRS usually approves approximately 42% of the 80,000 Offer in Compromise submissions. most rejections are due to processing errors.