Are you up to your ears in tax debt or at odds with the IRS over your tax liability? You may have more payment options than you think.
Offer in compromise (OIC)
Essentially, an OIC is an agreement with the IRS to settle your tax liability for less than the full amount owed. Usually, the IRS won't accept an OIC unless the amount you offer is equal to or greater than the "reasonable collection potential" (RCP) from assets you own - including real estate, autos, bank accounts and future earnings.
The IRS may accept an OIC for one of three reasons:
The application fee for an OIC is generally $186, although there are certain exceptions.
You may end up deciding to apply for an installment agreement instead if you can't pay the full amount of tax you owe within the OIC payment parameters. An installment agreement allows you to make a series of monthly payments over time.
The IRS offers various options for making these payments, including:
The user fee for installment agreements varies, depending on the type of payment, but the maximum fee is $225. Interest and possibly penalties will also be added to the amount owed.
Which option is better? It depends on your personal situation. Call to discuss what option is right for you.
To better serve our clients and friends, to keep you up-to-date and informed, our blog is a resource for tax tips and overall accounting related articles. We hope you find this useful!