Facing debt is stressful in and of itself, but facing tax debt is its own form of misery. Depending on how much you or your business owes, the Internal Revenue Service (IRS) could threaten to seize your wages or bank accounts. There’s no way to free yourself from tax debt completely, but you may be able to reduce the amount you owe through an Offer in Compromise (OIC).
An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s debt for less than the full amount owed if a taxpayer cannot pay the debt in full through an installment agreement or other means. Not everyone qualifies for an OIC. The IRS rejected 60% of recent offers, translating to about 41,000 rejections out of 68,000 requests.
If you qualify for an OIC, it can be a huge relief and offer a fresh start. But before you dive down the OIC rabbit hole, it’s best to weigh the pros and cons.
Offer in Compromise Pros
- You can have peace of mind knowing the IRS will stop hounding you.
- There is a manageable payment plan in place to relieve you from your tax debt.
- Your credit score will improve. After the OIC is complete, the IRS will release all tax liens against you.
Offer in Compromise Cons
- The IRS will conduct a comprehensive investigation of your finances, including all your income, expenses, and assets.
- Once accepted into an OIC, the IRS will put you on a five-year probation, requiring you to comply with tax filings and pay all taxes owed.
- Once finalized, OICs become public record, and anyone can discover you’ve settled your tax debt in such a manner.
An OIC isn’t the only way to reach an agreement with the IRS over your tax debt. The IRS has ten years to collect taxes you owe. You could wait out the timeframe and accept being a bad debtor in the eyes of the IRS. Bankruptcy is another option. Both have repercussions. If you’re facing tax debt, it’s best to discuss your options with a reputable tax professional.
While you may feel like there is no solution, options are available. Rely on the experts, the Highland Tax Group, for advice on whether an Offer in Compromise is a good fit for your situation.