IRS Adopts New Offer in Compromise Policy

Offer in Compromise

Important Notice

The IRS has updated its policy covering Offer in Compromise? applications: Applications will now be returned without consideration in instances where the taxpayer has not filed all required tax returns. In such cases, the application fee will be returned and any required initial payment submitted with the Offer will be applied to outstanding tax debt. This update is reflected on the Offer in Compromise page on IRS.gov and the newly updated Offer in Compromise Booklet (Form 656-B) available March 27.

Beginning with Offer applications received on or after March 27, 2017: The IRS will return any newly filed Offer in Compromise application if you have not filed all required tax returns. Any application fee included with the OIC will also be returned. Any initial payment required with the returned application will be applied to reduce your balance due. This policy does not apply to current year tax returns if there is a valid extension on file.

An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances:

• Ability to pay;
• Income;
• Expenses; and
• Asset equity.

The IRS generally approves an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. Explore all other payment options before submitting an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.

Make sure you are eligible

Before the IRS can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding. Use the Offer in Compromise Pre-Qualifier to confirm your eligibility and prepare a preliminary proposal.

Submit your offer

You'll find step-by-step instructions and all the forms for submitting an offer in the Offer in Compromise Booklet, Form 656-B (PDF). Your completed offer package will include:

• Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
• Form 656(s) - individual and business tax debt (Corporation/ LLC/ Partnership) must be submitted on separate Form 656;
• $186 application fee (non-refundable); and
• Initial payment (non-refundable) for each Form 656.

Select a payment option

Your initial payment will vary based on your offer and the payment option you choose:

• Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
• Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer. See your application package for details.

Understand the process

While your offer is being evaluated:

• Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
• A Notice of Federal Tax Lien may be filed;
• Other collection activities are suspended;
• The legal assessment and collection period is extended;
• Make all required payments associated with your offer;
• You are not required to make payments on an existing installment agreement; and
• Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.

If your offer is accepted

• You must meet all the Offer Terms listed in Section 8 of Form 656, including filing all required tax returns and making all payments;
• Any refunds due within the calendar year in which your offer is accepted will be applied to your tax debt;
• Federal tax liens are not released until your offer terms are satisfied; and
• Certain offer information is available for public review at designated IRS offices.

If your offer is rejected

• You may appeal a rejection within 30 days using Request for Appeal of Offer in Compromise, Form 13711 (PDF).
• The online self-help tool may provide additional assistance on appealing your rejected offer.

Make a Payment

Find all you need

to consider and make an offer in Form 656-B, Offer in Compromise Booklet (PDF)

Get Help

• OIC Frequently Asked Questions
• Understand Your IRS Notice
• Understand IRS Collection (videos)
• Download a Form

Pub. 594: IRS Collection Process

Explains the actions IRS may take to recover taxes owed. Download Pub. 594 (PDF)

About Global Tax Centers

Global Tax Centers is disrupting the $7.7 billion tax preparation industry with a combination of their new proprietary software, innovative online instruction and an individualized, non-institutional approach to tax preparation. Global Tax Centers is positioned to dominate the distribution of tax preparation services to the greatly underserved Main Street and un-banked markets and will look to emerge as a valuable distribution channel for additional financial product lines in the near future.

More information about Global Tax Centers is available online at www.globaltaxcenters.com. To speak directly with us, please contact Nathaniel R. Causley, Jr., Founder, Chairman, President & CEO at 609.254.4367, or by email at: [email protected] or [email protected].