IRS Offer in Compromise - Inaccurate Tax Bill

If you believe the bill is inaccurate, write the IRS office that sent you the bill, or visit your nearest IRS office. To help correct a problem, please include a copy of the bill and copies of any records, such as the front and back of canceled checks or money orders, or other information that will help explain what you believe is wrong.

IRS Offer in Compromise - Inaccurate Tax Bill

IRS Offer in Compromise - Rights and Protections

You have rights and protections throughout the collection process. Please refer to Publication 1, which provides additional information on Your Rights as a Taxpayer. More information on the collection process is available in Publication 594 (PDF), What You Should Know About The IRS Collection Process.

IRS Offer in Compromise - Rights and Protections

IRS Offer in Compromise - Notice of Levy

A Notice of Levy is another method the IRS may use to collect taxes that are not paid voluntarily. This means we can, by legal authority, take and sell property to satisfy a tax debt. This could include your wages, bank accounts, Social Security benefits, and retirement income. If your tax liability remains unpaid, the IRS may also levy assets such as your car, boat, or real estate.

In addition, when you have an outstanding tax liability, any future federal tax refunds that you are due will be offset by the amount you owe. Any state income tax refunds you are due may also be levied, and the proceeds applied to your liability.

IRS Offer in Compromise - Notice of Levy

Notice of Federal Tax Lien - IRS Offer in Compromise

By filing a Notice of Federal Tax Lien, the government establishes its interest in your property as a creditor. The lien is a claim against your property, including property that you acquire after a lien is filed. The lien is required by law to establish priority as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate.

Once a lien is filed, it may appear on your credit report and it may harm your credit rating. Therefore, it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary. Once a lien is filed, the IRS generally cannot issue a "Certificate of Release of Federal Tax Lien" until the taxes, penalties, interest, and recording fees are paid in full.

Notice of Federal Tax Lien

IRS Offer in Compromise - Notice of Federal Tax Lien

It is important to contact IRS and make arrangements to pay the tax due voluntarily. If you do not take some action to pay your tax bill or contact us to make arrangements to settle the account, the IRS may take enforced collection actions to secure payment.

Some of the actions IRS may take to collect taxes include:

Filing a Notice of Federal Tax Lien,
Serving a Notice of Levy; or
Offset of a refund.

IRS Offer in Compromise - Notice of Levy

Contact IRS - IRS Offer in Compromise

When you contact the IRS, you should be prepared to discuss your basic income and expense information. To prepare, gather together all of your information about your income, assets and necessary living expenses, such as your most recent pay stubs, rent or mortgage payment amounts, transportation expenses, etc. This will allow us to assist you most effectively.

Contact IRS - IRS Offer in Compromise

Contacting the Government

Contacting the Government IRS Offer in Compromise

When you contact the IRS, you should be prepared to discuss your basic income and expense information. To prepare, gather together all of your information about your income, assets and necessary living expenses, such as your most recent pay stubs, rent or mortgage payment amounts, transportation expenses, etc. This will allow us to assist you most effectively.

IRS Offer in Compromise - Don't Qualify for Installment Agreement

Once all payment options have been considered and it is determined that you do not qualify for an installment agreement, you may opt to file an offer in compromise. An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability.

The IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances. The IRS resolves less than 1% of its balance due accounts through the offer program.

IRS Offer in Compromise - Don't Qualify for Installment Agreement

What To Do If You Can't Pay Your Tax

Cant Pay - IRS Offer in Compromise

If you are unable to pay your balance in full, the IRS may be able to offer an individual payment plan based on monthly installments.

Direct debit installment agreements provide you with the ability to make timely payments automatically, therefore reducing the possibility of defaulting the agreement.

What To Do If You Can't Pay Your Tax? If you are experiencing a significant financial hardship and are unable to currently pay anything, the IRS may temporarily suspend collection on your account. Interest and late payment penalty will continue to accrue while you make installment payments or while collection is suspended. In addition, if you are a member of the Armed Forces, you may be able to defer payment of income tax that becomes due before or during your military service if your ability to pay is materially affected by your military service.

Got Notice from IRS?

Cant Pay Full Amount?

The unpaid balance is subject to interest which is compounded daily and a monthly late payment penalty. Therefore, it is in your best interest to pay your tax liability in full as soon as you can to minimize the amount of interest and penalty charged. You might also want to consider a cash advance on your credit card or a bank loan. The interest rate your credit card issuer or bank charges may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. It may also keep your tax debt from negatively affecting your credit rating.

IRS Offer in Compromise

IRS Offer in Compromise - The Collection Process Begins

If you do not pay in full when you file, you will receive a bill. This bill begins the collection process, which continues through alternative payment options and ends when your account is satisfied. The first bill you receive will explain the reason for your balance due and require payment in full. It will include the tax due plus penalties and interest that are added to your unpaid balance from the date your taxes were due. You can pay this bill by sending the IRS a check or money order payable to United States Treasury with your notice. To pay by credit card, call 1–800–272–9829 or 1–888–729–1040.

IRS Offer in Compromise - The Collection Process Begins

IRS Offer in Compromise - Suspension of Collection Efforts

Ordinarily, the statutory time allowed for collection is suspended during the period the OIC is under consideration, and is extended further if the OIC is later submitted to the Appeals Office. If the IRS grants a fresh start by accepting the OIC, it is expected the taxpayer will have no further delinquencies.

IRS Offer in Compromise - Suspension of Collection Efforts

Offer in Compromise - Must File Past Returns

Taxpayers requesting an OIC must have filed all required federal tax returns. If in business, they must also have filed and paid any required employment tax returns on time for the two quarters prior to filing the OIC, and be current with deposits for the quarter in which the offer in compromise was submitted. Taxpayers must also not be a debtor in a bankruptcy case.

Offer in Compromise - Must File Past Returns

IRS Offer in Compromise - Missed Payments

If taxpayers do not abide by all the terms of the agreement -- including filing all future returns and making all payments when required for 5 years or until the offered amount is paid in full, whichever is longer -- their OIC may be declared in default. If the IRS rejects the OIC, taxpayers will be notified by mail. In the IRS letter, it will explain the reason for the rejection and provide detailed instructions on how to appeal the decision.

Taxpayers may choose to pay the offer amount in a lump sum, in monthly payments over the remainder of the statutory time allowed for collection, or a combination of a lump sum and monthly payments. Generally, it is to the taxpayer’s advantage to pay the amount in the shortest time possible because longer payment terms will require a larger offer amount.

IRS Offer in Compromise - Missed Payments

Reasons for Offer in Compromise

The IRS may legally compromise for one of the following reasons: doubt as to liability, when doubt exists that the assessed tax is correct; doubt as to collectibility, when doubt exists that the taxpayer could ever pay the full amount of tax owed; or effective tax administration. Under effective tax administration, there is no doubt that the assessed tax is correct and no doubt that the amount owed could be collected, but the taxpayer has an economic hardship or other special circumstances which may allow the IRS to accept less than the total balance due. Absent special circumstances, taxpayers that have the ability to pay the tax liability in a lump sum through an installment agreement will not be eligible for an OIC.

Reasons for Offer in Compromise

Reasonable Collection Potential (RCP).

The minimum offer amount must generally be equal to, or greater than, a taxpayer's reasonable collection potential (RCP). The RCP is defined as the total of the taxpayer's realizable value in real and personal assets, plus future income.

What is an Offer in Compromise?

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that resolves the taxpayer's tax liability. The IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances. An OIC is considered only after all other collection alternatives have been explored.