Learn The Truth About The OIC Program – By now, most troubled taxpayers looking for a way to resolve their IRS debt have seen commercials from large tax debt relief services claiming taxpayers paid tens of thousands of dollars by paying only pennies on the dollar. Reactions to these commercials by taxpayers vary from “Wow I won’t have to pay all this tax debt” to “It’s scam no one really gets out of paying that much money to the IRS”.
The actual truth about the “Pennies on the dollar” Offer in Compromise is somewhere in the middle.
While it is true some taxpayers can negotiate their tax debt by paying only pennies on the dollar with the offer in compromise program, the IRS has a very strict set of rules and a small percentage of taxpayers will actually qualify for the OIC program.
To help understand the Internal Revenue’s reasoning and motivation behind the OIC program it’s important to remember the IRS is not allowing a negotiated settlement because they want to be nice. The IRS is accepting debt settlement offers for less than the amount owed because they feel they will either they will get their money faster, or that they would not otherwise be able to collect any funds at all.
To qualify for an Offer in Compromise the taxpayer (or their tax attorney) must show either of the following:
Doubt of Collectability
– Doubt of collectability means the amount of tax liability is correct but the taxpayer will be unable to ever pay the full amount owed. There can be many reasons for this including the age and health status of the taxpayer.
Doubt of Liability
– Doubt of liability is more simple – the taxpayer must show they do not owe the IRS the amount the IRS has assessed.
