Many people have seen the various national tax agencies on daytime television offering to settle their tax debt with cents on the dollar. However, what's left out of their sales pitch is that nearly 80 percent of IRS compromise offers are rejected for a variety of reasons. This isn't all a bad thing, but it requires strategic planning on the part of the taxpayer. If you qualify, you are not required to make any payment of the application fee at the time of submission or during consideration of your offer.
Once your offer is accepted, no additional tax balances can be added to the offer and must be paid in full; otherwise, the offer will become default. In general, if you're not absolutely sure that the IRS will approve your OCI with the amount of the proposed offer, the ICO can be an expensive and unfeasible solution. To qualify for an ICO, the taxpayer must have filed all tax returns, received a bill for at least one tax debt included in the offer, have made all the estimated tax payments required for the current year and, if the taxpayer is a business owner with employees, must have made all required federal taxes deposits for the current quarter and the previous two quarters. But since we generally make money when you find an offer that you like and that you receive, we try to show you offers that we think are right for you.
One piece of advice worth repeating is that it's best to have an experienced tax professional to represent you in your dealings with the IRS. You are allowed the total amounts of the National Standard based on your family size and income level, without the IRS questioning the amount you actually spend. In some cases, an OIC is returned to the taxpayer instead of refusing it, because the taxpayer did not submit the necessary information, filed for bankruptcy, did not include a required application fee or a non-refundable payment with the offer, failed to file the required tax returns, or has not paid tax obligations current at the time the IRS is considering the offer. If your financial situation improves before the collection law expires, the IRS can renegotiate these terms.
When taxpayers can't pay their taxes with their monthly assets and income, they may qualify for a transaction offer (OIC). The agency suggests that taxpayers “explore all other payment options before submitting a transaction offer. First, you should have received a detailed letter from the IRS offering specialist who was assigned to your IRS transaction offer. In all of the above cases, the Feds weigh their unique facts and circumstances, including capacity to pay, revenues, expenses, and asset capital.