Posted On March 17, 2016

Is an OIC your best option to resolve tax debt? an FAQ

If you have tax debt that you can’t pay all at once, there are several different options open to you.

If your credit is good or you have someone who will lend to you, you could borrow the money need to pay your taxes. Or you could arrange for a payment plan or work out an installment agreement with the IRS.

But if you seek to settle your tax debt for less than the full amount you owe, the option that it makes sense to explore is an offer in compromise (OIC). In this post, we will address three frequent questions about OICs.

What are the eligibility requirements for an OIC?

Before the IRS will even consider an OIC, you have to be what the IRS calls “compliant.” This means that you must have filed all of your past tax returns and taken care of any other tax payments that are not part of the OIC.

You also have to remain compliant while your OIC application is pending.

In addition, you are not eligible for an OIC if you are in the midst of bankruptcy proceedings.

How often does the IRS accept an OIC?

For the IRS, accepting an OIC is a pragmatic choice. It applies in cases where the amount offered is the most that the IRS can reasonably expect to collect from you within a reasonable time.

In recent years, the acceptance rate for OICs has gone up somewhat. It was less than 1 in 4 as recently as five or six years ago. By 2013, however, it had risen to more than 40 percent.

If the IRS refuses your offer, can you appeal?

Yes, you can. We will discuss this further in an upcoming post.