Tax Relief: An Offer In Compromise (oic)

There is only one way that the US taxpayer and the IRS can resolve tax debt to a lesser amount, with an “Offer In Compromise”. This is an agreement made between the taxpayer and the IRS and offers some tax relief.

Essentially, this means that the IRS is mandated, in certain circumstances, to settle or “compromise” any liabilities owed to the federal government by accepting an amount less than the full payment owing. There are a number of reasons why a tax debt may be legally compromised. These are:


• Doubt as to liability – meaning that there is doubt that the tax return has been correctly assessed
• Doubt as to collectibility – this means there is doubt as to whether the taxpayer would ever be able to repay the full amount of tax owed
• Effective Tax Administration – where there is no doubt that the tax has been correctly assessed and able to be paid to the IRS; but, exceptional circumstances exist where the IRS will give consideration to the taxpayers OIC. In this instance, the taxpayer has to prove that re-payment of the tax debt would be unfair and inequitable and might even cause financial hardship.

The OIC is the only method the IRS allows a taxpayer tax relief on an outstanding tax debt for less than it is actually worth. Unfortunately, many consumers have misunderstood the concept of the OIC program and it has been abused by tax preparers who use unscrupulous methods.

Since July, 2006, there are three tax relief methods of payment within the OIC program:
• Lump sum payment
• 24 or less monthly payments
• Monthly payments over the balance of the statute of limitations.

By: N.F.Centeno

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