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How to Qualify for an Offer in Compromise

If you owe a substantial amount of IRS tax debt that you cannot repay, an Offer in Compromise might be the right solution for your circumstance. Generally, an OIC is a program that allows eligible taxpayers to reduce an outstanding tax liability. Knowing whether you may qualify for this program can assist in making an offer that is acceptable to the IRS.


Your Responsibilities During the Application Process

Filing qualifications for an OIC includes meeting financial conditions set by the tax agency. Generally, undergoing an IRS audit or being in a bankruptcy proceeding disqualifies from receiving an Offer in Compromise.

It is your responsibility to show proof that your current financial situation prohibits you from paying the full amount of the IRS tax debt. Copies of bills, documented income, list of assets and bank statements are usually required to support your claim. After reviewing your documentation, the IRS will determine whether you are qualified to participate in the OIC program.


What to Expect After Qualifying for the OIC Program

Once the IRS determines that you qualify for the Offer in Compromise program, the agency will review the offer you make. In most cases, the agency accepts IRS tax debt offers that it considers the best collectible amount within a specific time frame. There are instances where the IRS is willing to accept an OIC for as little as 12 cents on the dollar. If you are approved for such a plan, the amount must be paid either through deferred payments or a lump sum.


Benefits of Qualifying for an OIC

Typically, you are not subject to tax liens during the application process. Additionally, the IRS will not issue a levy within the first 30 days after your OIC is rejected, if this happens. You have the right to appeal a rejected offer, during which time the IRS will not subject your property to a tax lien.

The application process for an Offer in Compromise can take several months or years. Therefore, you might benefit from the assistance of an experienced tax specialist. He or she is familiar with the OIC program and current tax laws that could impact your situation.

Additionally, a tax specialist is familiar with the administrative procedures of the IRS and uses this insight to provide effective representation. Working with a tax specialist increases your chances of developing an effective strategy that will resolve your tax debt.

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