Understanding the IRS Offer in Compromise Program

Navigating tax debt can be overwhelming, especially when faced with mounting balances owed to the IRS. Fortunately, the IRS offers a potential solution for eligible taxpayers through its Offer in Compromise (OIC) program. This program allows individuals and businesses to settle their tax debt for less than the full amount owed, but only if specific conditions are met. Let's explore what the OIC program entails, how it works, and when it might be the right choice for taxpayers.

What Is an Offer in Compromise?

An Offer in Compromise is an agreement between a taxpayer and the IRS to settle outstanding tax liabilities for a reduced amount. The IRS may accept an OIC if it believes that the taxpayer's financial situation means they cannot pay the full tax debt or if doing so would create significant financial hardship.

​The IRS evaluates each application based on the taxpayer's ability to pay, income, expenses, and asset equity. The goal is to reach an amount that the IRS considers the maximum it can reasonably collect within a reasonable period.

Who Qualifies for an Offer in Compromise?

The IRS is selective when accepting offers. Generally, you may qualify if:

• You can't pay the full tax amount owed: The IRS must determine that your financial resources are insufficient to cover the tax debt within the statute of limitations for collections.
• There is doubt as to the accuracy of the amount owed: If you believe the tax amount assessed is incorrect, an OIC may be appropriate.
• ​Paying the full amount would cause financial hardship: If paying your tax debt would leave you unable to cover basic living expenses, the IRS may consider your offer.

Key Requirements to Submit an Offer

Before submitting an OIC, you must meet the following prerequisites:

1. File all required tax returns: The IRS will not consider an OIC if you have unfiled tax returns.
2. Make all estimated tax payments: For self-employed individuals, this includes any required quarterly tax payments.
3. Demonstrate a clear inability to pay: You'll need to provide detailed financial information, including documentation of your income, expenses, and assets.

The IRS uses a specific formula to determine whether your offer is acceptable. This formula considers your assets, disposable income, and basic living expenses to establish what they believe you can realistically pay.

How a CPA Can Help You with an Offer in Compromise

Navigating the OIC process can be complex, and mistakes in your application can result in rejection or delays. This is where hiring a Certified Public Accountant (CPA) becomes invaluable. An experienced CPA like Larry Bradford can:

• Assess your eligibility: Determine if an OIC is the best solution for your tax situation.
• Prepare a strong application: Help gather necessary documents, accurately complete forms, and ensure your offer is calculated correctly.
• Negotiate with the IRS on your behalf: A CPA can advocate for you, making sure you receive the best possible outcome.

Dealing with the IRS can be stressful, but you don’t have to face it alone. If you're struggling with tax debt, contact Larry Bradford, CPA, today to discuss your options and see if an Offer in Compromise is right for you. 
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Don’t wait until the IRS takes action—let Larry Bradford guide you through the process and work toward a fresh financial start. Call 512-402-0049 or send an email to [email protected] to schedule an appointment.