Finding a way to settle your tax debt can feel like navigating a steep, unfamiliar trail, especially if you’re already on an IRS installment agreement that doesn’t feel sustainable. Maybe your financial situation has changed, or perhaps you’ve learned that there are alternatives worth exploring. One option that might offer a more manageable path forward is an Offer in Compromise (OIC).
Payment Plan vs Offer in Compromise
An IRS installment agreement, or payment plan, allows you to pay your full tax debt over time through monthly payments. An OIC, on the other hand, will enable you to settle your tax debt for less than you owe if you can prove financial hardship.
You can apply for an OIC if you’re already on a payment plan, as long as you meet the eligibility requirements. The IRS will look at:
- Income and monthly expenses
- Assets and equity (like home or car value)
- Ability to pay before the statute of limitations expires on your tax debt
You can use the IRS Pre-Qualifier Tool to get a quick idea of your eligibility, but a professional review will give you a much clearer picture. If your installment agreement feels overwhelming or unrealistic based on your current financial circumstances, an OIC could provide a significantly reduced total debt. It can also protect you from IRS collection actions during the review of your OIC application.
Applying for the Offer in Compromise
To submit your OIC application, you’ll need:
- Form 656
- Form 433-A or 433-B
- $205 application fee (which can be waived if you meet low-income guidelines)
- Initial payment (depends on your offer type)
Once you submit your Offer in Compromise, your installment agreement is paused. You’re not required to make payments during the review period, which can last several months. However, interest and penalties may continue accruing.
Getting Your OIC Accepted
Only a small percentage of OICs are approved, so submitting a complete, accurate application is crucial. At Highland Tax Resolution, we can help you decide if moving from a payment plan to an OIC is the right move. We’ll evaluate your eligibility, prepare your application, and advocate on your behalf with the IRS. Reach out to our tax experts today so we can get started.