The IRS Code states: "We will accept an Offer in Compromise (OIC) when it is unlikely that we can collect the
full amount owed and the amount you offer reasonably reflects the collection potential..." (Internal Revenue Code
section 7122).
Often it is possible to fully and completely eliminate the taxes you owe - including all penalties and
interest - at an enormous discount. There is no preset bottom limit that the IRS will accept to settle your debt
especially if your offer is done "right." If done correctly your debt may be settled for only 5-15% of what you presently owe. The key is to determine
the least amount that the IRS will accept from you before you make the offer. (Due to several changes in the program over the years, the procedures for determining the "minimum acceptable offer" the IRS can accept have become more stringent. There is less room for judgment by IRS examiners than in the past. In our opinion, the OIC program is not nearly as effective or useful as it was originally envisioned by Congress. Depending on the income/assets of the taxpayer, the OIC program may not be as attractive as it once was.
There are elaborate procedural hurdles to overcome in making an offer and in getting an offer accepted. The IRS also has extensive internal guidelines it follows in making the determination that it is "unlikely to collect the full amount owed". The administrative processing time can also be extensive. Offers may take from six months to a year to work through the entire Offer in Compromise system at IRS.
NOTE: California has an offer in compromise system which is administered through the State Board of Equalization. The process is even more onerous than the IRS system, and for all intents and purposes is only applicable where liabilities are huge - not for the typical family or small business situation.
The first step in an OIC is to determine whether or not an OIC is even a viable option for you. This can be done relatively easily. We can assist you in making this determination, and in determining the next steps to take.
