Law Offices of Maryam M. Golbarg, P.C.
Your Tax Relief Attorney
Tax Solutions
Settling Your Tax Liability
Offer in Compromise (OIC)
An IRS Offer in Compromise (OIC) is the ultimate path to eliminating your tax liability. It is the “Make a Deal” program that allows you to settle your IRS tax debt for less than the full amount (including penalties and interest). It allows you to offer the IRS as much money as you can (within 5 to 24 months) and in return, the IRS will agree to write off the total outstanding liability.
The IRS accepts Offers in Compromise not only from individuals, but also from businesses.
Who is eligible for an OIC?
In order to qualify for an OIC, the taxpayer must have filed all required tax returns, made all required estimated tax payments for the current year, made all required federal deposits for the current quarter (if business with employees), should not be in an open bankruptcy proceeding, and should meet the OIC’s eligibility requirements. There are many different factors including, but not limited to, the taxpayer’s age, health, income, assets, and liability that will be considered to determine the taxpayer’s eligibility and the amount of an Offer in which the IRS may accept.
Beware of empty promises from tax resolution companies claiming that they can get and even guarantee an OIC for you. A thorough financial analysis and often Pre-Offer Planning are needed to determine if you are eligible for an OIC.
How much to offer?
The IRS may accept an OIC only if the amount offered is equal to or greater than the reasonable collection potential (the RCP). The RCP is how the IRS measurers the taxpayer’s ability to pay and is the total of the net equity in assets and the anticipated future income less allowable living expenses (Disposable monthly income). As you can see, the OIC is a number game, and it is based on a mathematical equation.
Below is a simplified equation for the settlement amount for the two OIC payment options:
1. Lump Sum Cash Offer: the OIC to be paid within 5 months or less after the offer is accepted:
(Disposable monthly income * 12)+Net realizable equity= Settlement amount
2. Periodic Payment Offer: the OIC is payable within 6 to 24 months after the offer is accepted:
(Disposable monthly income * 24)+Net realizable equity= Settlement amount
Let Us Permanently Resolve Your Tax Problems!
We have had tremendous success in obtaining Offers in Compromise for individual and business taxpayers. Call us and let us determine if you qualify for an OIC and permanently resolve your tax balances with the IRS.
Offer is Accepted. Now what?
If the IRS accepts the offer, then the taxpayer will have no further delinquencies if he/she abides by all the terms and conditions of the OIC. However, as a condition to the offer, the taxpayer must timely file all tax returns and pay all taxes for five years from the date of acceptance of the OIC. Additionally, any refunds due within the calendar year in which the offer is accepted will be applied to the tax debt.
Post-Offer Planning and IRS Transcripts Alert
Planning is crucial after the IRS accepts your Offer. You have to make sure to comply with all terms and conditions including paying the amount of the offers according to the terms of the Offer, timely filing all tax returns, and paying all taxes for five years from the date of acceptance of the OIC to avoid defaulting the Offer. If the OIC defaults and the IRS terminates the OIC, the agreement is no longer in effect and the IRS will attempt to collect the amounts originally owed (less payments made), plus penalties and interest.
We are here to help you by providing reminders and alerts. Please read more on our IRS Transcripts Alert page.
