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Offer in Compromise (OIC)

  • OVERVIEW: An Offer in Compromise (“OIC”) is an agreement that allows taxpayers to settle their tax debt for less than the full amount owed. An Offer in Compromise may be based on the following provisions: (1) Offer In Compromise Doubt as Liability (“OIC DATL”); (2) Offer In Compromise Doubt as to Collectibility (“OIC DATC”); (3) Doubt as to Collectibility with Special Circumstances; or, (4) Effective Tax Administration. The OIC DATL, is used when the taxpayer believes the actual amount of tax is incorrect based upon a provision in Internal Revenue Code and has evidence/facts to support their claim. This type of offer is sometimes used instead of an Audit Reconsideration because the IRS Offer In Compromise Unit has a better tracking system and response rate. The second type of offer is the OIC DATC. This offer is based on the fact that the taxpayer doesn’t have sufficient income and assets to full pay the liability. Contrary to popular belief, the amount of the offer is not a random number or percentage the taxpayer would like to pay, but based on a mathematical financial formula that is summarized as follows:

    (Income - Necessary Living Expenses) = X multiplied by 12 months (if you will pay your offer in 5 months of fewer) or multiplied by 24 months (if you will pay your offer in 6 - 24 months) + Equity in Assets (minus exemptions) = Minimum Offer Amount.

    Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time (also known as Reasonable Collection Potential or RC:. The IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer’s income and assets, to make a decision regarding the taxpayer’s ability to pay. The third type of offer is the OIC Doubt as to Collectibility with Special Circumstances. Under this provision, the IRS still considers the taxpayer’s ability to pay, but also considers additional factors such as age, employment status, dependents, education, mental or physical illness, etc. Lastly, the OIC based on Effective Tax Administration is an offer where the taxpayer is able to pay the tax in full, but collection of the full liability would cause the taxpayer economic hardship or there are compelling public policy or equitable considerations to compromise the tax, and compromising the liability will not undermine compliance by taxpayers with the tax laws.

  • REQUIREMENTS: All returns must be filed and any required estimated tax payments made if applicable. Taxpayer must pay $186.00 application fee and include a 20% deposit unless they qualify for low-income certification.

  • LIENS: Tax liens removed if offer amount is accepted and paid in full.

  • PROS: Taxpayer may settle for substantially less or “pennies on the dollar.” I am sure you have heard many TV and Radio ads for nationwide scam tax resolution services/companies advertising such deals. While it is true that some can settle their tax debt for substantially less or pennies on the dollar, each individual’s circumstances are different and it is based on the individual’s financial ability to pay and unique facts of their case. Tax liens will be removed once offer is accepted and paid in full. Offers are automatically accepted if the IRS does not make a determinate within two years of receiving the offer in compromise package.

  • CONS: From start to finish an offer takes approximately 1 ½ years to complete. Taxpayers must remain complaint for the next 5 years after the acceptance of an offer. Any balance due during that period can default the agreement and the tax debt will be due in full. Any tax refunds due within the calendar year in which the offer is accepted will be applied to the past due tax liability. In addition, very few offers are accepted. Individuals that qualify for Currently Non-Collectible Status and possess other factors (age, disability, mental health issues, physical illness, lack of education, etc.) are more likely to have an offer accepted. During the time a taxpayer is in the offer the IRS collection statute expiration date (“CSED”) is tolled by the time in the offer plus 30 days. Tolling means time is added to the initial statue of 10 years. Thus, the taxpayer may be required to continue making monthly payments based on offer amount, but the statute is not running. It is very important to choose a qualified Atlanta Tax Attorney that has the experience and knowledge to know if your offer is likely to get accepted before it is submitted.

  • BEWARE: Many nationwide tax resolution services/companies promise taxpayers that they will settle their IRS tax debt for “pennies on the dollar” by filing an offer in compromise when the individual is not a good candidate. These type of nationwide scam tax resolution companies end up making money regardless if the taxpayer’s offer is accepted. Most of the time, the taxpayer is left paying the fee to one of these scam companies, their offer was rejected, they still owe the tax, and more time has been added for the IRS to collect, which leaves the taxpayer in a worse condition than they started.

If you would like more information on the IRS Offer in Compromise program please contact us today at (404) 551-5838 for a free one hour consultation with Alyssa Maloof Whatley, Atlanta Tax and Bankruptcy Attorney.

I run a CPA firm and Alyssa has helped my clients that have IRS issues. Her expertise ends up giving the clients more favorable tax liability positions than they had before. She is enjoyable to work with and communicates clearly and to the point. I have learned a lot from her due to her immense tax resolution knowledge.
Alyssa Whatley helped us with a major tax issue that seemed impossible and she seemed to do it with ease. She helped us through a very difficult and hard time. Alyssa's work ethics and performance set a very high standard that we value. She works with strong intention and honesty. She represented us so well and gave us honest answers. She was careful and this made us know that she is trustworthy. We knew that she really wanted to help us and that is her heart for why she does what she does. Alyssa has an endearing confidence that gave us assurance and a calm knowing that she is very knowledgable and good at what she does! Alyssa always responded promptly to us and kept us very informed. She is definitely at the top of her game in her field! Thankful to have had her representing us! Lindy
Alyssa immediately impressed me with her competence. That was most important to me. How well will my attorney do their job for me? Alyssa knocked it out of the park for me. Her understanding of our overly complex Tax laws never ceased to amaze me. Alyssa seemed to know every trick in the book to achieve the best results. Alyssa analyzed my state of affairs and delivered better results than I had hoped for. Before meeting Alyssa, I was wary about whether my attorney would have _my_ best interest at heart? I did not expect a cheerful attorney; What a difference a smile makes when you're going through troubled waters. Alyssa deserves my highest recommendation. I just wish I could express my appreciation better. Job well done, Alyssa! Thank you! Anonymous
I contacted Alyssa after I was wrongfully imprisoned due to a clerical error by Fulton Co. Alyssa listened with empathy to my entire story and took all of the correct steps in handling my case. Alyssa updated me frequently on my case so that I could rest assure it was in the right hands. Alyssa was able to get my case dropped and my money returned very quickly. Mrs. Whatley came highly recommended to me and I see why. Alyssa's professionalism, experience, compassion, and positive attitude was exactly what I needed during this time of uncertainty. Kaitlin
Mrs.Whatley handled a case for us with the IRS. We had tax liens after a Chapter 13 bankruptcy and she was able to have them removed promptly. She is extremely knowledgeable about tax law and I'd recommend her to anyone, including my own family and friends. Keith