IRS OIC: What Is It?
An OIC (Offer in Compromise) is a method that enables you to settle your tax debt by paying just a small amount to the IRS, as little as 1% of the tax due. In order to qualify for this, strict requirements should be satisfied.
Though taxpayers have no right to get a tax debt lowered, doing so is still at the IRS’s discretion. The chances of getting an OIC accepted is slim, but the IRS are still obliged to give it a just amount of consideration as long as it’s submitted properly. Moreover, if your OIC gets rejected, you can get the IRS Appeals Office review it further.
Submitting an OIC is a considerable strict process. The Form 656, Offer in Compromise, must be accomplished with a $150 application fee. If you can prove that you qualify under the guidelines of poverty by filing the Application Fee Worksheet included in the Form 656 booklet, you can be exempt from this fee.
It’s best to determine if your case justifies the effort and time needed to submit the OIC because the process is stringent. Along with your form, you’ll be requested to submit large quantities of documentation such as pay stubs, vehicle registrations, and bank records, which could provide the IRS with more information to use against you if your OIC gets rejected.
To qualify for OIC consideration, you must meet any of 3 conditions. One condition states that there needs to be doubt as to collectability, meaning there is considerable doubt that the IRS can collect the tax debt from you at present or in the future. Another qualification is doubt as to liability. This would entail giving sufficient proof to doubt if you are truly responsible for the tax debt. The last concept says that paying your tax debt in full is unjust as it will place you at an extreme economic hardship.
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