What are the Rules for an IRS Offer in Compromise?

Offer in compromise is a debt settlement program that comes under the federal statutory tax law. It is the official unison or agreement between the payer entity (any individual, company, etc.) and the authority of the Internal Revenue Service for settling down the tax debts by paying half or less of the tax payment. It differs from an installment agreement (which allows taxpayers to pay tax debts monthly).

There are a few conditions you need to meet for getting eligible for an offer in compromise, such as being a timely taxpayer, always estimating the tax payments, and whether you have enough assets to pay the bills or not. If you are in an open bankruptcy, then you are not eligible for the agreement. After meeting the condition, there are a few rules for an Internal Revenue Service offer.

Rules are given below:

1. It is always necessary to submit a small portion of the tax debt along with the offer. Generally, it is 20% of the total amount. Or you can pay in a few periodic lump sum installments, but not more than five installments. Only if the offer is accepted must you pay the remaining amount.
2. The first rule is to choose a mode of payment and pay the application fee, which is 205$ and non-refundable if the application is rejected.
3. Follow all tax regulations. Taxpayers must obey every instruction and tax regulation in the future. Click here to learn more.
4. Submit all required documents and verify them carefully as per the requirements for individual taxpayer form 433-A (OIC) or business and corporate form 433-B (OIC).
5. Carefully assess the tax payment or tax imposed by the authority; you need to estimate payments for the current year to have your offer in compromise accepted by the responsible authority.

Final Overview

It is important to note that the IRS has the discretion to accept or reject an OIC based on a variety of factors, including the taxpayer’s income, expenses, assets, and liabilities. The IRS may also consider the taxpayer’s current and future ability to pay, as well as any special circumstances that may affect their ability to pay.