IRS resources help taxpayers determine if an offer in compromise is the right way to resolve tax debt

IRS Tax Tip 2021-172, November 22, 2021

Individual taxpayers and business owners can use the IRS's Offer in Compromise BookletPDF or the new how-to video series to learn how an offer in compromise works and decide if it could help them resolve their tax debt. Taxpayer's can use pre-qualifier tool see if they are eligible for an offer in compromise.

An offer in compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. An offer in compromise is an option when a taxpayer can't pay their full tax liability. It is also an option when paying the entire tax bill would cause the taxpayer a financial hardship. The goal is a compromise that suits the best interest of both the taxpayer and the agency.

When reviewing applications, the IRS considers the taxpayer's unique set of facts and any special circumstances affecting the taxpayer's ability to pay as well as the taxpayer's:

  • Income
  • Expenses
  • Asset equity

The booklet covers everything a taxpayer needs to know about submitting an offer in compromise, including:

  • Who is eligible to submit an offer
  • How much it costs to apply
  • How the application process works

The booklet also includes the forms that taxpayers must complete as part of the offer in compromise process. The current application fee is $205. However, taxpayers who meet the definition of a low-income taxpayer don't have to pay this fee.

New how-to video series on offer in compromise

The IRS recently launched a how-to video series on this valuable payment option for taxpayers.

The playlist consist of easy-to-navigate information taxpayers need to know when considering and applying for an OIC. Topics in the series include:

  • An overview of the OIC process, forms and pre-qualifier tool for help in getting started
  • Step-by-step walk throughs of Forms 433 – A & B OIC, which are known as collection information statements and needed for individual and business-related offers
  • A step-by-step example of how to complete the OIC application, Form 656
  • A final checklist to ensure everything needed is included to submit a valid offer

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