Who Qualifies for an Offer in Compromise?

When you owe money to the IRS, one avenue to consider is an Offer in Compromise (OIC). You may qualify for an OIC when you cannot pay the full amount of your outstanding taxes or if paying the total amount would create an undue financial hardship. If you’re eligible, an OIC allows you to settle your debt to the IRS at less than the amount owed.

The IRS recommends that you consider all other payment options before applying for OIC.

Who’s Eligible for an OIC?

You may apply for OIC when you meet the following criteria:

  • You’ve filed all required tax returns
  • You’ve made all required estimated payments
  • You aren’t involved in an open bankruptcy proceeding
  • If applying for the current tax year, you have a valid extension for your current year return
  • If you’re an employer, before being eligible to apply, you must have made tax deposits for the current and previous two quarters

The IRS will return both the application and fee for those who apply for OIC but aren’t eligible. If a denied application includes any offer payment, that amount will be credited toward your outstanding tax due.

How Does the IRS Decide on an OIC Request?

The IRS decides OIC requests on a case-by-case basis. They’ll look at your circumstances and situation when making the decision. Some of the factors the IRS may consider:

  • Ability to pay
  • Income
  • Expenses
  • Asset equity

If you qualify as low-income under IRS guidelines, you won’t have to pay the application fee or make monthly payments while the IRS reviews your OIC application.

The IRS advises those who apply for OIC that they’re likely to approve an application when the amount you offer is more than the IRS expects they can collect within a reasonable amount of time.

If the IRS finds you haven’t filed all legally required tax returns while reviewing your OIC application, they’ll return your offer and application fee. You can’t appeal this decision.

If you’re unable to pay your tax debt, the Highland Tax Group can help. We’ll make sure you’ve submitted the necessary paperwork and met other eligibility guidelines, as well as walk you through what tax resolution option is best for you. Contact us to learn how we can help.