If you owe back taxes to the IRS, you may be considering an Offer in Compromise (OIC) to settle your debt for less than the full amount owed. But how much should you offer? This guide will provide you with the information you need to calculate an appropriate OIC amount and increase your chances of getting your offer accepted.
What is an Offer in Compromise?
An OIC is an agreement between you and the IRS to settle your tax debt for less than the full amount you owe. The IRS may accept an OIC if you meet certain eligibility criteria, such as:
- You are unable to pay your tax debt in full
- Paying your tax debt in full would create a financial hardship
- There is doubt as to the correctness of the tax debt
How to Calculate Your OIC Amount
To calculate your OIC amount, you will need to complete Form 656, Offer in Compromise. This form will ask you to provide information about your income, assets, and expenses. Once you have completed the form, you will be able to calculate your minimum offer amount.
Your minimum offer amount is the amount that the IRS will accept if you pay your OIC in a lump sum. If you plan to pay your OIC in installments, you may be able to offer a lower amount.
Factors to Consider When Determining Your OIC Amount
When determining your OIC amount, you should consider the following factors:
- Your ability to pay: The IRS will consider your income, assets, and expenses when determining whether to accept your OIC. If you have a high income or significant assets, you may be required to offer a higher amount.
- The amount of your tax debt: The amount of your tax debt will also affect your OIC amount. If you owe a large amount of taxes, you may be required to offer a higher amount.
- The likelihood of your offer being accepted: The IRS is more likely to accept an OIC if you can demonstrate that you are unable to pay your tax debt in full and that paying your debt in full would create a financial hardship.
How to Submit Your OIC
Once you have calculated your OIC amount, you will need to submit your offer to the IRS. You can submit your offer online or by mail. If you submit your offer online, you will need to use the IRS’s Offer in Compromise Pre-Qualifier tool.
What Happens After You Submit Your OIC
Once you have submitted your OIC, the IRS will review your offer and make a decision. The IRS may accept your offer, reject your offer, or request more information. If the IRS accepts your offer, you will be required to make payments according to the terms of your agreement.
Getting Help with Your OIC
If you need help calculating your OIC amount or submitting your offer, you can contact a tax professional. A tax professional can help you determine the best course of action for your specific situation.
An OIC can be a valuable tool for taxpayers who are unable to pay their tax debt in full. By following the steps outlined in this guide, you can increase your chances of getting your OIC accepted.
Offer in Compromise 2023: How to Qualify and Submit Your Offer to the IRS
FAQ
How much will the IRS usually settle for?
What is an appropriate Offer in Compromise with IRS?
How likely is the IRS to accept an Offer in Compromise?
What is the formula for the IRS Offer in Compromise?
How much does an offer in compromise cost?
The booklet also includes the forms that taxpayers must complete as part of the offer in compromise process. The current application fee is $205. However, taxpayers who meet the definition of a low-income taxpayer don’t have to pay this fee.
How do I get an IRS offer in compromise?
An application for an IRS offer in compromise has three parts: Completed IRS forms 433-A and 656. If you believe the tax debt isn’t yours or doesn’t actually exist, you can also file Form 656-L. A $205 application fee, which is nonrefundable, but may be waived if you meet the IRS low-income guidelines.
What is a tax offer in compromise?
Before you apply, you must make federal tax deposits for the current and past 2 quarters. An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability or doing so creates a financial hardship.
Can an IRS offer in compromise help you settle tax debt?
IRS offers in compromise can help you settle tax debt for less than you owe, but they’re difficult to qualify for. The application process can take quite a long time, but these offers can be a huge help if you’re struggling to get out from under a debt load. An IRS offer in compromise enables you to settle tax debt for less than you owe.