Learn how the Larson Tax Relief team can help you request an offer in compromise to settle your tax debt for less than what you owe.
About Larson Tax Relief Services
Larson Tax Relief is a team of IRS and state tax relief experts. They specialize in providing individuals and businesses with solutions to their tax woes.
Founded by Jack and Ron Larson, this award-winning tax resolution firm has over 16 years of experience serving clients in all 50 states. To date, they’ve helped more than 18,000 happy customers get the relief they need from federal and state tax-related matters.
The firm boasts an A+ rating with the Better Business Bureau. Company President Jack Larson, one of 17 federally licensed IRS Enrolled Agents on staff, is also a member of the National Association of Tax Professionals and the National Association of Enrolled Agents.
Offer in Compromise with the IRS
Do you owe back taxes and can’t repay the entire balance? You can request an Offer in Compromise to settle your tax debt for less than what you owe.
What Is an Offer in Compromise?
An Offer in Compromise (OIC) is an agreement between the IRS and the taxpayer to settle unpaid tax debt for a fraction of your total balance. It’s a viable option if you’re experiencing financial hardship, but the IRS is not obligated to accept your offer. So, it’s ideal to confirm your eligibility before submitting a request.
Also, review other payment options to get current on back taxes as an OIC should only be used as a last resort.
Who Qualifies for an IRS Offer in Compromise?
The IRS requires you to submit an OIC application to confirm your eligibility for a settlement. Generally, you want to meet these criteria:
- File all legally required returns
- Be in receipt of a bill for one or more tax debts included in your offer
- Be current on all mandatory estimated tax payments for the current year
If you’re a business owner submitting an OIC application, you must be current on all mandatory federal tax deposits for the current quarter.
Also, note that individuals and businesses who are in bankruptcy proceedings are not eligible for an OIC.
What is the Minimum Offer Amount on an Offer in Compromise?
The minimum offer amount on an OIC is determined on a case-by-case basis. It should be determined by your income, expenses, assets, and future earning potential. Use IRS Form 656 (OIC) to compute a reasonable figure.
When you apply for consideration, you will also need to submit your initial payment based on the option you select on the application. Here’s a breakdown of each:
- Lump Sum Cash: 20 percent of the total settlement amount. Upon acceptance of your offer, you must remit the outstanding balance in no more than five payments.
- Periodic Payment: one payment equivalent to the amount of the monthly payments disclosed in your OIC application. If your offer is accepted, you will continue to pay each month until you no longer owe the IRS.
The Types of Offers In Compromise (see pg. 25)
There are the primary reasons that warrant the acceptance of an OIC by the IRS:
- Doubt as to Collectibility: This means you’re unable to repay what you owe within the statutory period because your assets and income are insufficient.
- Doubt as to Liability: This means there’s legitimate doubt you owe the assessed tax liability. You may qualify for an OIC based on this reason if the tax examiner mistakenly interpreted the tax code to assess liability, the taxpayer has new evidence to counter the outstanding balance, or the examiner did not consider the evidence presented by the taxpayer.
- Exceptional Circumstances (Effective Tax Administration): This means your assessed tax liability is correct, and you owe the funds, but an extenuating circumstance warrants the consideration of an OIC by the IRS. In short, the taxpayer must prove that paying the total amount owed would be inequitable, unfair, or create a severe financial hardship.
How to Get an Offer in Compromise with the IRS
To apply for an OIC with the IRS, take the following actions:
- Compile your financial information. This includes
- Complete Form 656 (OIC) and 433-A Collection Information Statement for Wage Earners and Self-Employed Individuals and attach the required documentation (if applicable).
- Complete Form 656 (OIC) and 433-B Collection Information Statement for Businesses and attach the required documentation (if applicable).
- Remit the $205 application fee and your initial payment by mail or online using the EFTPS. (Quick note: You’re exempt from paying the fee if you’re an individual that meets the Low-Income Certification guidelines. In that case, you can submit an offer without remitting the application fee).
- Make copies of your documents and mail the originals to the IRS.
While reviewing your application, the IRS will evaluate your income, expenses, ability to pay, asset values and equity to determine if you are unable to satisfy the debt due to a financial hardship. Ultimately, the IRS wants to confirm that the proposed settlement amount accurately represents the maximum amount they can expect to receive in a reasonable period.
Unfortunately, it can be challenging to navigate the OIC application process, and it can take up to a year and a half to complete the process. Furthermore, incomplete applications will be returned to the taxpayer. And if you haven’t yet filed the required tax returns or remitted mandatory estimated tax payments, you can expect the application to be rejected. (An exception to the rule applies if you haven’t yet filed your return for the current tax year and the IRS has accepted your request for an extension.)
If your OIC application is rejected, you have a right to appeal the decision. Submit Form 13711 (Request for Appeal of Offer in Compromise) to receive a reconsideration of your initial request.
Fortunately, Larson Tax Relief has a team of experienced tax resolution specialists who are well-versed in creating these proposals and can help boost your approval odds.
Fill out the form online to get a free evaluation or learn more about how to work with their team.
Other Tax Relief Services Offered by Larson
Do you need assistance with another federal or state tax-related matter? Larson Tax Relief also offers a plethora of business, IRS, income, and state tax relief solutions. If you’re facing a wage garnishment or bank levy, there’s also emergency assistance for those urgent matters. Learn more about other tax relief services they can provide for you:
Get a free consultation with Larson Tax Relief by calling 833-833-4151 or filling out the online form.