The Internal Revenue Service (IRS) encourages individuals struggling with the burden of taxes to take their life into their own hands and consider potential alternatives. Does your organization serve clients who owe the IRS, but can’t pay? An Offer in Compromise (OIC) may be the answer.
An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. If a client is unable to pay his or her tax liability in a lump sum or through an installment agreement and has exhausted their search for payment arrangements, the client may be a candidate for an OIC.
Who Qualifies for an Offer in Compromise?
In order for a client’s OIC to be considered, they must meet the following requirements:
*Your client may be exempt from the $150 OIC fee depending on income or whether the OIC is based solely on doubt as to tax liability. Taxpayers who claim the poverty guideline exception must certify their eligibility using Form 656-A, Income Certification for Offer in Compromise Application Fee. The poverty guideline exception applies only to individuals.
How do you File an Offer in Compromise?
The Form 656-B, Offer in Compromise Bookletcontains information about filing an OIC and all forms necessary to file one.
When submitting an OIC, you must use the most current version of Form 656, Offer in Compromise, or Form 656-L, Offer in Compromise (Doubt as to Liability), depending on the basis of the OIC.
This article originally ran in the IDAresources.org Update Newsletter on 09/15/11 and is available for archival purposes.