Offer in Compromise

The Offer in Compromise (OIC) program is an IRS program which allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed to clear the debt.  The objective of the OIC program is to accept a compromise when acceptance is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements.

There are certain requirements you must meet in order to qualify for consideration, which include an analysis of your income, expenses, assets and debts, and an inability to pay the liability in full.   If accepted, it allows for a clean slate as long as the taxpayers stay in compliance with the agreement, file their tax returns on time and make all payments going forward.

 Qualifying Conditions

At least one of three conditions must be met to qualify a taxpayer for consideration of an OIC settlement:

  • Doubt as to Liability — Debtor can show reason for doubt that the assessed tax liability is correct
  • Doubt as to Collectibility — Debtor can show that the debt is likely uncollectable in full by the IRS under any circumstances
  • Effective Tax Administration — Debtor does not contest liability or collectibility but can demonstrate extenuating or special circumstances that the collection of the debt would "create an economic hardship or would be unfair and inequitable."            This Offer in Compromise program is available for any taxpayer, but is primarily used by individuals that are elderly, disabled, or have special extenuating circumstances.

Based on their financial situation, many taxpayers will not qualify for an offer. If that is the case, there are several other remedies available for tax relief.

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