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IRS OIC Program

Last month the IRS finalized their annual “Dirty Dozen” list of tax scams to help inform and warn taxpayers of the common scams and schemes that are on the rise. On the list was “Offer in Compromise mills”, which are tax resolution companies that aggressively promote the offer in compromise (OIC) program to individuals and businesses who do not qualify, often costing them thousands of dollars in the process without a resolution of their tax issue.

As background, the IRS has 10 years from the time you officially owe the taxes to collect the balance. The OIC is an important program that helps individuals and businesses settle their aggregate outstanding liability with the IRS within that 10-year window for less than what is owed. However, not every individual or business qualifies for the program. To initiate an OIC, you must complete and submit an application to the IRS. The application includes a thorough disclosure of your financial situation, disclosing the value of any assets that you own as well as a full disclosure of your monthly income and expenses. The IRS caps certain expenses based on where you live.

Who qualifies for the OIC program? The IRS considers your disposable income (monthly income less IRS allowed living expenses) and the value of your equity in all your assets. If this shows that you cannot fully pay your balance to the IRS within that 10-year window, you may qualify to settle your balance for less than what is owed. However, it is always based on this formula, it is not something you can simply request or negotiate.

Once you confirm that you qualify for an OIC, another formula-based analysis must be done to determine what you will offer the IRS to settle your liability. It is important to include the appropriate documents with your OIC application to demonstrate your case and understand from that point forward you must always be compliant with your taxes.

Although the OIC application is available online, there are a lot of pitfalls that taxpayers must be aware of, including effectively presenting your case and facts, making it very important to seek appropriate counsel to not only confirm you qualify for an OIC, but to improve your chances that your OIC application will be accepted by the IRS. Be wary of those companies that claim they can settle your debt for “pennies on the dollar!,” as we often have to assist taxpayers that have used these services and paid thousands of dollars with no progress. Instead, give the experienced attorneys at Hone Maxwell a call to discuss your situation and available options!

Disclaimer: Hone Maxwell LLP articles and blogs are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.

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