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Offer in Compromise - What It Is | Los Angeles - San Diego| Flat Fee Tax Service

Updated: Jun 15

Offer in Compromise - IRS Tax Settlement - What It Is -

Los Angeles - San Diego - California

The IRS has a tax settlement program known as an Offer in Compromise (OIC) which provides financially taxpayers who can pay their monthly bills but have nothing left over an opportunity to settle their tax debts, including interest and penalties, for a lump sum which is drastically less than the total amount owed. Some tax settlement companies advertise this as if it is a brand new or limited time program. In fact, the Offer in Compromise program has been are right there in the 1954 version of the Internal Revenue Code. Over the years the IRS has, at least based upon its official guidelines, become more lenient. A successful Offer in Compromise can be a lot of hard work to convince the IRS that the offered tax settlement is valid and is the appropriate solution.

The amount of the Offer in Compromise will vary depending upon your income, assets, liabilities, and future income prospects. Current IRS guidelines allow for this lump sum to be paid in several installments over a period as long as two years, however, the total payments are higher for a lump sum Offer in Compromise.


Some tax settlement companies are less than honest and fail to properly explain to new clients that if the entire amount of the tax, plus accrued interest and penalties can be paid over the remaining life of the collection statute of limitations, the IRS will not consider accepting the Offer in Compromise. In some situations, the more you owe, the more likely it is that the IRS will accept an Offer in Compromise.

Our tax professionals have found that the negotiation of an OIC is a lengthy process usually taking from 10 months to a year. If the IRS fails to reject or accept the Offer in Compromise during a two-year period, the OIC will be deemed to be accepted. During the time the IRS settlement is pending, the IRS will not require any payments on old taxes. However, during the time an OIC is pending, you must pay all of your current taxes as they become due, including any quarterly estimated income tax payments and federal payroll tax deposits. If you fail to do so, the IRS will immediately reject your Offer in Compromise and you will not be entitled to any appeal rights. Furthermore, your deposit, discussed below, will be applied to your taxes and if you wish to make a new settlement offer, you will need to make an additional deposit.

At the time the OIC is filed, a deposit must be submitted. The amount of the deposit is 20% of the amount offered for a "lump sum" Offer in Compromise. For a "periodic payment" Offer in Compromise, you must include the first proposed installment with the settlement offer. While a periodic payment Offer in Compromise is being evaluated by the agency, you must make subsequent proposed installment payments as they become due. If the Offer in Compromise is rejected, withdrawn, or returned, the IRS keeps any deposits made and applies them to the back taxes you owe. There is a filing fee for Offers in Compromise. As of 2016, the filing fee was $186. It is expected to go up substantially. REMEMBER THIS: THE IRS WANTS TO DO TWO THINGS. COLLECT "SOMETHING" AND CLOSE CASES. AN OFFER IN COMPROMISE ACCOMPLISHES BOTH OF THESE IRS GOALS.

Your conversation with our Los Angeles and San Diego tax professionals will take approximately 20 to 30 minutes to complete. By the time we are done, you will know if an Offer in Compromise is the right choice for you. The IRS does not allow a tax settlement firm to guarantee the outcome of any tax relief resolution, however, our tax professionals have been very successful with our Offer in Compromise settlements so we always feel very comfortable with our evaluations.