Taxpayers who have a tax debt they cannot pay may have heard that they can settle their tax debt for less than the full amount owed. It’s called an Offer in Compromise. Before applying for an Offer in Compromise, here are some things to know:

What does an offer in compromise ( OIC ) mean?

If you can’t pay back tax debt due to hardship, an Offer in Compromise (OIC) allows you to reduce debt in a way that won’t hurt your outlook. An IRS Offer in Compromise (OIC) is a tax debt settlement plan. It allows taxpayers to agree with the IRS to settle a tax debt for less than what they owe.

How many offers in compromise did the IRS accept in 2017?

People of all ages and incomes are waking up to the power of an OIC. In 2017, the IRS accepted 25,000 of 62,000 proposed Offers in Compromise. That’s a 40.3% approval rate, amounting to almost $256 million.

How can I find out if I qualify for offer in compromise?

To find out if you are eligible for an offer in compromise, use the IRS’s pre-qualifier tool. However, even if you do qualify, there is no guarantee that your offer will be approved. The IRS says the Offer in Compromise program is not for everyone.

How to make an offer to the IRS?

Your initial payment will vary based on your offer and the payment option you choose: 1 Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. If your offer is… 2 Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly… More …

How to appeal a rejection of an offer in compromise?

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.

Can a taxpayer accept a settlement offer from the IRS?

In general, the IRS cannot accept a settlement offer if the taxpayer can afford to pay what they owe. Taxpayers should first explore other payment options. A payment plan is one possibility.

What can be settled with an offer in compromise?

An Offer in Compromise can be submitted to settle any federal tax liability incurred under the Internal Revenue Code. This includes both business taxes (payroll, income, etc.) and individual taxes (income, trust fund recovery penalties, etc.). It can only settle taxes that have already been assessed.

What happens if you reject an offer in compromise?

An offer in compromise will stop tax levies under section 301.7122 (g) (1) of the US Federal Tax Regulations. That regulation states that the IRS will not levy upon a taxpayer’s property while a valid offer in compromise (an offer that has been accepted for processing) is pending and, if rejected, for thirty days after the rejection.