You may have heard the ads on the radio, maybe seen them on TV, or companies
have even called you about receiving tax relief by settling your tax debts through the IRS Offer
in Compromise Program. Are these ads true?

Can you settle your tax debts with the IRS through an offer in compromise?

The answer is – maybe. The IRS Offer in Compromise Program may allow you to settle your tax debt, but your financial circumstances and other circumstances must make you eligible for the OIC Program. The information below provides a comprehensive look at settling your tax debts through the IRS Offer in Compromise Program.

What is an IRS Offer in Compromise?

In short, this is a tax settlement. You offer the IRS an amount of money to settle your tax debt. Upon payment of the settlement amount, your tax debts
are cleared, tax liens are released, and you owe no tax.

Who is Eligible to Participate in the Offer in Compromise Program?

Technically, anyone can submit an offer in compromise to the IRS. However, the taxpayer must comply for the IRS to process an offer in compromise. Compliance means that all tax returns required to have been filed are actually filed and that any tax payments due have been paid in full. If you are not compliant, the IRS will return your offer in compromise. Additionally, to have a good chance of the IRS accepting your offer in compromise, your recent and current financial circumstances must be in an overall position where the IRS would agree to a settlement.

How Much Will it Take for the IRS to Settle my Tax Debt?

Your IRS offer in compromise, or “settlement amount” is based more on your ability to pay than the total amount of tax you owe. To calculate your offer in compromise amount, the IRS will look at your income and expenses, and your equity in assets. Generally, the IRS will only accept an offer in compromise when, based on your income and expenses and equity in assets, you cannot satisfy your tax liability. There are exceptions and conditions whereby the IRS may accept an offer in compromise even if you have the ability to pay the tax debt in full. These exceptions are discussed in greater detail below.

IRS will initially calculate your offer amount using the following equation: Your disposable income multiplied by 12 or 24 plus your equity in assets. Let’s look at equity in assets first. All of your assets from homes and cars to retirement accounts and bank accounts (and other assets) are considered when the IRS looks at your ability to pay. When considering equity, the IRS will allow reductions of the fair market value of assets and debts on assets. For example, the IRS allows for a 20% reduction when calculating the equity in your home. Thus, if your home had a fair market value of $350,000 and you owed $250,000 on the mortgage for your home, you would have $30,000 in equity for purposes of the offer in compromise calculated as follows: $350,000 x .8 = $280,000 – $250,000 (mortgage) = $30,000 in equity. You also receive a reduction of 20% in the fair market value of retirement accounts, investment accounts, and other assets when calculating the equity for purposes of the offer. Your disposable income is calculated by totaling all income from all sources and subtracting your allowable expenses. Thus, you would include income such as wages, interest, dividends, business income distributions, and other sources in your total income.

Your allowable expenses (also referred to as the national standard for allowable living expenses) are set by the IRS and can be found on the IRS website. The allowable living expenses are dictated primarily by where you live and the number of individuals in your household. Allowable living expenses include food, clothing, housing, utilities, car payments, car operating expenses, and out-of-pocket healthcare expenses. You can claim your actual healthcare expenses if your allowable out-of-pocket healthcare expenses exceed the allowable standard. Once you have calculated your total income and all allowable expenses, the difference is your disposable income, and the figure is multiplied by either 12 or 24 and then added to your equity in assets for the offer in compromise amount. For example, if your disposable income was $600 per month and the only equity you had was in your house per the example above, your over amount would be $37,200, calculated as $600 x 12 + $30,000.

What Forms and Documents Do I need to Submit with my Offer in Compromise?

The IRS has specific forms you need to submit when proposing an offer in compromise. As an
individual, you would complete Form 433A OIC, which is the financial statement whereby you
provide your asset, income and other financial information. In addition to Form 433A OIC, you
would submit Form 656. Form 656 is the form whereby you state your personal information, the
tax years or liabilities you are proposing to settle and the offer in compromise terms (offer
amount and payment terms). The attachments and documents you need to submit with the offer
in compromise will be determined by the items and issues on your financial statement primarily
and perhaps whether or not you are claiming any extenuating circumstances on your offer. For
example, you need to provide your most recent bank statements for all bank accounts, current
statements for any retirement account or investment accounts, current mortgage statement for
any real estate you own, current statement for any vehicle payment showing the monthly
payment and total loan amount and documents such as pay stubs or profit and loss statements to
verify your income. Please note, if you own a business, you may have the requirement to submit
a business financial statement on Form 433B and attach related documents and substantiation for
the business.

Once I Submit My Offer in Compromise What is the Process?

Generally, you will receive a notice from the IRS that the offer has been received and that you will receive contact within 90 days. However, it usually takes about 6 months for an IRS offer examiner to make contact with you with anything material. When the offer examiner does contact you, they may make a request for additional documentation and have a list of questions or issues to discuss to with you. Eventually, the examiner will provide a determination with an equity in asset table and an income and expense table. The equity in assets table will list each asset, the fair market value applied to the asset, the reduction to fair market value (if any), any loan or encumbrance on the asset, and then the equity allocated to the asset. Then all of the equity amounts are totaled. The income and expense table will state the income you claimed and the income as allocated by the IRS, and then all of the expenses you claimed on the 433A OIC financial statement versus the expenses allowed by the IRS to thus calculate your disposable income. The equity in assets and the disposable income are then applied to provide your offer amount.

What Determinations Can The IRS Make on My Offer?

Based upon the figures in your equity in asset table and income & expense table, the IRS can accept the offer as you submitted, reject the offer amount you offered but agree to accept an increased offer amount or reject the offer because your equity in assets and disposable income show that you can full pay the liability. If the IRS does reject your offer, you have the right to request an appeal of the rejection and work with the IRS Appeals Office to see if an agreement on a settlement can be reached.

What Happens When I Appeal The Offer Rejection?

When the offer rejection is appealed, you are assigned an appeals officer to consider the items and issues you disagree with. The appeals officer assigned to your case will send you a notice calling for an initial conference. You are allowed to provide additional information and documentation to the IRS Appeals Officer and the appeals officer will consider all information and make a determination to accept an offer or sustain the IRS’ rejection of your offer. Many offers are accepted through the appeals process and thus one should not lose hope if their offer is initially rejected by the IRS offer examiner.

If the IRS Accepts My Offer in Compromise What Other Obligations Do I Have?

Beyond paying the agreed-upon offer amount, the IRS requires that you remain in compliance by timely filing all returns and paying all taxes for the five years after the offer. If you fail to remain in compliance, the IRS can default the offer and settled liabilities would be due and owed again.

If you have any questions about your offer in compromise, please get in touch with a tax attorney at The McGuire Law Firm or schedule a Free Consultation with one of our 24/7 live agents.

This issue is discussed in the video below by John McGuire, a tax attorney at The McGuire Law Firm.

You can contact The McGuire Law Firm to speak with a tax attorney.

What is an IRS Offer in Compromise?

An offer in compromise allows a taxpayer to settle their tax debt with the Internal Revenue Service for less than the total amount of tax owed.  Generally, the IRS will accept an offer in compromise if the offered amount by the taxpayer is the most the IRS could collect from the taxpayer within a certain period of time.

Offer In Compromise Pre Qualifier Tool

The IRS has an Offer in Compromise Pre Qualifier tool that can be very useful to taxpayers wondering if they would be eligible for an IRS Offer in Compromise.  The pre qualifier tool initially asks the taxpayer questions related to tax return filings, estimated payments and other tax payment & filing issues as well as bankruptcy (click for initial questions).  These issues could dictated whether or not a taxpayer is even eligible to submit an IRS Offer in Compromise.  Thereafter, the Offer in Compromise Pre Qualifier Tool asks financial questions related to income, expenses, assets, asset values and loans.  These financial questions break down a taxpayer’s equity in assets and disposable income which are the major factors considered by the IRS when accepting or rejecting an offer in compromise.

IRS Offer in Compromise Form

Form 656 is the form submitted to the IRS when submitting your offer in compromise.  Form 656 states the taxpayer’s information, the tax types and periods of which the taxpayer is attempting to settle, and perhaps most importantly, the offer in compromise amount and terms for payment.  In addition to Form 656, the taxpayer must submit the proper financial statement.  An individual taxpayer will submit Form 433A OIC, and a business taxpayer will submit Form 433B OIC.  If an individual has ownership interests in a business, the individual would likely need to file Form 433B for such business.

Where To Submit Your IRS Offer in Compromise

Your offer will initially be submitted to one of two offer in compromise units, which are in Memphis, TN and Holtsville, NY.  Where you live, will determine the office where you will file your offer.  The offer in compromise booklet provides the correct address based upon where you live.

What Decisions can the IRS make regarding my Offer?

The IRS can either accept, reject or return your offer.  Acceptance, of course would be preferred!  If the IRS rejects your offer, they may reject the amount, but agree to a larger amount and thus you may still be able to settle your tax debt.  You can also appeal the rejection by filing Form 13711.  The IRS will return an offer if, for example, the taxpayer is out of compliance.  You do not have appeal rights on a returned offer.

What Information is Public?

The IRS does make certain information regarding offers public.  Click, “information” for addresses of IRS offices with information open to public inspection.

Publication 594

IRS Publication 594 discusses the IRS collection process and may be useful to you as you are considering submitting an offer in compromise to the IRS.  Generally, submitting an offer to the IRS acts as a hold on enforcement.

If you have questions regarding the IRS Offer in Compromise process or your ability to settle a tax debt, you can discuss these issues with a tax attorney at The McGuire Law Firm.  A free consultation is provided to all clients.

An offer in compromise is based more off of a taxpayer’s ability to pay as opposed the taxpayer’s total debt.  Thus, first and foremost, a taxpayer looking to submit an offer in compromise to the IRS must complete a financial statement.  An individual will complete Form 433A OIC and a business will complete Form 433B OIC.  An individual with an interest in closely held businesses should likely complete both Forms 433A OIC and 433B OIC.  These forms are financial statements that help calculate the taxpayer’s reasonable collection potential, which is determined by equity in assets and disposable income.  Of course, if a taxpayer does have special or extenuating circumstances, these issues can be presented to the IRS as a reason for the taxpayer to not pay their full collection potential.  Upon completing the necessary financial statements, the taxpayer should be able to calculate their offer amount.

Upon completing the offer amount, Form 656 should be completed, which states the taxpayer’s information, the tax debts of which the taxpayer is attempting to settle and the offer terms.  The offer terms will include the offer amount and over what time period the taxpayer will make such payments.  Further, the offer terms can dictate the payment that must be submitted with the offer and whether payments need to be made as the IRS is reviewing the offer.

The taxpayer will submit Form 656 and the necessary financial statements and attachments to the appropriate IRS Offer in Compromise Unit.  Currently, there are 2 units whereby a taxpayer would initially submit their offer in Holtsville, NY and Memphis, TN.  Upon submitting the offer, the taxpayer will receive verification of receipt.  Thereafter, likely in 4-8 months, the taxpayer will receive contact from the offer unit and an offer examiner.  More information or documents could be requested, or the offer could be accepted, rejected or returned.  If the offer is rejected, the taxpayer does have appeal rights and can appeal such rejection.  If you have questions related the settlement of an IRS tax debt, speak with a Denver tax attorney at The McGuire Law Firm through a free consultation.  Please enjoy the video below, and hopefully, you have found this information useful.

Call The McGuire Law Firm to schedule a free consultation with a tax attorney in Denver, Colorado or Golden, Colorado.

Many people and businesses may owe taxes to the IRS and need to resolve such debts.  Common resolutions to a tax liability would be an installment agreement, a partial payment installment agreement, an offer in compromise or having the liability placed in a non-collectible status.  Each of these resolution is discussed in more detail below.

Installment Agreement

An installment agreement is an agreement with the IRS whereby a taxpayer and the IRS agree to the taxpayer making a monthly payment on or before a certain day of each month, which will resolve the total tax debt.  Depending upon the amount of tax owed and the amount the taxpayer is willing to pay, an installment agreement may be formalized without financial disclosure.  However, after the liability exceeds a specific amount and/or the taxpayer is requesting to pay an amount less than what the IRS would want, the taxpayer would need to disclose their current financial circumstances to the IRS.  An individual would complete Form 433A and a business would complete Form 433B.  An installment agreement can be formalized with a revenue officer or through automated collections if a revenue officer is not assigned to the file.

Important facts to keep in mind regarding an installment agreement are:

1) Penalty and interest continue to accrue while you are making payments.

2) The failure to pay penalty is cut in half to .25% per month.

3) The failure to timely make a payment or make a payment in full will default the agreement.

4) The accrual of an additional tax or failure to timely file a tax return will default the agreement.

5) The IRS can still file a notice of federal tax lien.

Partial Payment Installment Agreement

A partial payment installment agreement is similar to an installment agreement except that if the taxpayer continues to make the agreements as agreed upon for the remainder of the collection statute, the tax debt will not be paid in full.  For example, say Jeff owes the IRS $175,000 and there is 5 years remaining on the IRS collection statute.  Jeff completes Form 433A and has monthly disposable income of $1,500.  Thus, if Jeff paid $1,500 per month to the IRS for 60 months, payments would only total $90,000.  The above facts apply to a partial payment installment agreement, and in addition, the IRS can and generally does request an updated financial statement from the taxpayer every 24 months.  If the updated financial statement shows an additional ability to pay, the IRS can and generally will request that the monthly payment be increased.

With the recent changes made to the IRS offer in compromise, generally if an individual would qualify for a partial payment installment agreement, they could likely qualify for the offer in compromise program and settle their tax debt.

Offer in Compromise

An Offer in Compromise can be considered a tax settlement.  The taxpayer proposes to pay an amount to the IRS that is less than the total amount of tax due in full satisfaction of the debt.  From the above example, Jeff may offer the IRS $18,000 to settle his $175,000 debt.  The offer amount is based off of the taxpayer’s ability to pay, which is determined by the taxpayer’s equity in assets and disposable income.  The taxpayer will complete the appropriate financial statement and Form 656.  The offer is submitted to the IRS Offer in Compromise Unit, and an examiner is assigned.  Usually it take anywhere from 6 to 12 months to receive a determination from the offer unit.  The offer could be accepted, rejected but a higher amount proposed, rejected because the IRS states you can full pay the debt or returned.  If the offer is returned, the taxpayer has no appeal rights.  If the offer is rejected, the taxpayer can provide additional information for consideration and has appeals rights with the IRS appeal office.

Some important facts regarding an offer are:

1) Penalty and interest continue to accrue while the offer is being reviewed

2) There is an automatic hold on IRS enforcement while the offer is being reviewed

3) The IRS collection statute is tolled (not running) while the offer is being reviewed

Currently Non-Collectible Status

Currently Non-Collectible Status is when the IRS agrees not to collect from a taxpayer because based off of the taxpayer’s equity in assets and disposable income, the taxpayer cannot pay.  Generally, if a taxpayer can be placed into non-collectible status, they could qualify for the offer in compromise program and thus may want to consider an offer to resolve their IRS debt.

There are other resolution options as well such as bankruptcy, IRS penalty abatements, innocent spouse relief and equitable relief options.  A tax attorney can analyze your current circumstances and assist you with your options.  You can speak with a Denver tax attorney by contacting the McGuire Law Firm and scheduling a free consultation.

1) How much can I settle my tax debt for?  It depends.  A tax settlement or offer in compromise amount is based off of your ability to pay, not necessarily how much tax you owe.

2) How is my tax settlement calculated?  In calculating a taxpayer’s tax settlement amount, you look at equity in assets and disposable income.  Equity in assets would be any equity in any asset such as house, car, jewelry, retirement accounts etc.  Some assets can receive a discount when calculating the equity.  For example, you can lower the fair market value of your retirement accounts by 30% when calculating the equity in such account(s).  Disposable income is calculated by taking the taxpayer’s total income less allowable expenses.  I state allowable because the IRS states amounts for certain expenses that they will allow a taxpayer to claim.

3) What is the tax settlement equation?  The equation if stated mathematically would be: Equity in assets + Disposable income x 12 or 24.

4) How long does it take to settle my taxes?  Once you submit your tax settlement proposal (offer in compromise) to the IRS it will generally take 6-12 months to receive a determination.  Generally, an individual with W2 income will receive a determination quicker than an individual that has business interests or a business that is attempting to settle their tax debts.

5) Where do I submit my tax settlement?  Initially your offer in compromise will be submitted to Holtsville, NY or Memphis, TN depending upon where you live.

6) What are the payment terms of my tax settlement?  You can submit a cash offer whereby you pay 20% down when submitting the settlement proposal and then pay the remaining amount (if accepted) in 5 or fewer payment and you propose the date(s) for payment.  Or, you can submit a proposal whereby you make payments evenly over 24 months.  The first payment is submitted with the offer and each month while the offer proposal is being reviewed you continue to make payments.  Thus, if you offered $24,000, you would make a $1,000 payment each month until directed otherwise.

7) What are the other conditions of the tax settlement?  Generally, the IRS will keep your tax refund for the year in which the offer is accepted.  Further, you must  timely file and pay all taxes for generally a 5 year period or the offer can default.

John McGuire is a tax attorney in Denver, Colorado and has successfully submitted many tax debts for his clients.  The video below further discusses a tax settlement.  If you owes taxes to the IRS, call The McGuire Law Firm to speak with a Denver tax attorney through a free consultation.

The video below has been prepared by a Denver tax lawyer to provide additional information regarding the calculation of an IRS offer in compromise.  If you have a tax debt to the IRS and are questioning your ability to settle such debt, speak with a Denver tax lawyer at The McGuire Law Firm through a free consultation.

What is an Offer in Compromise?

An offer in compromise is an agreement with the IRS where an individual or business taxpayer offers to pay an amount to the IRS that is less than the total amount of taxes owed to satisfy their liability.  Many people would call this a tax settlement or an accord and satisfaction with the IRS, and it pretty much is.

What is the Offer in Compromise Equation or How Much do I have to Pay the IRS?

I am always asked, “how much do you think it will take to settle my taxes with the IRS?”  Many people have the misconception that there is a percentage that can be offered to the IRS to settle their liability or that the IRS will automatically accept.  The truth is, the amount the IRS will accept to settle the tax debt is based upon each taxpayer’s ability to pay and what the IRS considers to be a taxpayer’s reasonable collection potential (RCP).  A taxpayer’s RCP is determined by their equity in assets and their disposable income, and then general equation for an offer in compromise would look like:  Equity in Assets + Disposable Income X 12 (or 24).  Please note that prior to May of 2012, the IRS would multiply disposable income by 48 or 60, which often created situations whereby the IRS would accept an offer, but the taxpayer without assistance had no way to satisfy the debt within the time period the IRS wanted payment.

Equity in Assets:

Equity in assets would be calculated by taking the fair market value of the taxpayer’s assets from their home, car, bank accounts, retirement accounts, stock, gun collections, jewelry, art and all other assets (including business interests) less any liability associated with the asset such as mortgage or car loan.  It is important to know that the taxpayer is allowed an exemption for certain assets and a reduction in the fair market value of certain assets.  For example, a taxpayer is allowed approximately a $3,450 exemption for each personal vehicle, up to two vehicles.  Thus, if a taxpayer had a 2010 Ford F150 with a fair market value of $20,000 and a car loan of $10,000 the equity in such vehicle that would be included within the taxpayer’s offer would be $6,550.  This would be calculated: $20,000 (Fair Market Value) less $10,000 (car loan) less the $3,450 exemption.  If the car loan exceeded the fair market value of the vehicle, then no equity would be included from such vehicle in the offer amount.  An example of a reduction of the fair market value would be that generally, the IRS will allow a 20% reduction in the fair market value of a taxpayer’s primary residence when calculating the equity in such property.  Thus, if a taxpayer owned a house with a fair market value of $300,000 and a mortgage of $200,000, the amount of equity from such property included in the offer amount would be $40,000.  This would be calculated: $300,000 (fair market value) multiplied by .8 less $200,000 mortgage= $40,000.  You could also multiply $300,000 by 20%= $60,000 and then subtract such amount from the fair market value of the property.

Disposable Income:

Disposable Income is calculated by taking the taxpayer’s total household income less the taxpayer’s allowable expenses.  I state “allowable” expenses because the IRS may not allow all of the taxpayer’s expenses and the IRS has established national standards for allowable expenses that will provide an amount that the IRS will allow the taxpayer to use or claim as an expense.  Items such as food, clothing, housing, utilities and transportation have an allowable standard that is all the taxpayer will be allowed to claim as an expense.  For example, a single taxpayer living in Denver, Colorado may be allowed $1,250 for housing and utilities.  If the taxpayer was actually paying $1,750 for housing and utilities, the taxpayer would only be able to claim $1,250 as an expense when calculating disposable and essentially the excess $500 would be considered disposable income by the IRS.

Now that we know the offer equation and have a better understanding of how the IRS will view equity in assets and disposable income, lets provide an example.  Assume Jeffrey owes the IRS $123,000.  Jeffrey has total equity in assets after exemptions and reductions in fair market value of $12,000.  Jeffrey has monthly disposable income of $1,500 after all allowable expenses are deducted from his monthly income.  Jeffrey’s offer amount would be $30,000 ($12,000 + $1,500 x 12) or $48,000 ($12,000 + $1,500 x 24).

What Terms of Payment Plan Will the IRS Allow for my Offer in Compromise?

When preparing your offer in compromise you must select one of two options for payments to the IRS.  Option one is considered a cash offer whereby you pay 20% of the offer amount when submitting the offer, and the remaining offer amount is paid over five or fewer payments within a certain time period of the IRS accepting the offer.  Generally, the IRS will want the remaining 80% of the offer within 3-6 months of acceptance.  When offering to pay under such terms, the taxpayer’s disposable income is only multiplied by 12 as opposed to 24, which could be a very big advantage to the taxpayer.  If you were offing $20,000 to settle the liability, you would make a payment of $4,000 when submitting the offer and the remaining $16,000 would be payable upon acceptance within a reasonable time frame.  Option two allows the taxpayer to pay their offer amount over 24 months.  The taxpayer’s disposable income is multiplied by 24.  If a taxpayers was proposing an offer amount of $24,000 the taxpayer would make a payment of $1,000 when submitting the offer and would continue to make $1,000 per month payments to the IRS until a determination or final agreement had been reached.  If a taxpayer’s offer in compromise is not accepted, the payments are applied to the total liability.

How do I Prepare and Submit an Offer in Compromise to the IRS?

You must complete the appropriate financial statement(s) and Form 656.  If you are attempting to resolve an individual liability, such as a 1040 debt, you would complete Form 433A OIC.  If the individual attempting to resolve their 1040 debt owns a business, they will likely request that you complete Form 433B, which is a business financial collection statement.  A business attempting to resolve its debt with the IRS would prepare and submit Form 433B OIC.  After completing the necessary financial statements, it is imperative that you include all of the required attachments, which will be dictated by your circumstances, but might include, bank statements, pay stubs, most current statements for retirement accounts and verification of other items as stated on the statement.  Form 656 states the taxpayer’s information, the periods of tax that are included within the offer, the reason for the offer, offer amount and terms.  Once all statements and forms have been compiled, your offer will be submitted to an IRS Offer in Compromise Unit.  There are two main offer units, one in Holtsville, NY and the other in Memphis, TN.  The 656 Instructions will state which unit you should forward your offer too, which is determined by where you live.  Further, these instructions will provide for the current application fee, which must be enclosed when the offer is submitted.

What is the Procedure with the IRS Offer Unit?

Within two to four weeks of submitting your offer, you should receive a notice from the offer unit that the offer has been received and generally this notice will state that you will be contacted within 90 days.  Don’t hold your breath though!  Often the only contact I receive in 90 days is another notice stating that we will be contacted within another 90 days.  Upon receipt, the offer unit will check to make sure the offer can be processed.  Generally, this means they will check for the correct payments and forms, and may check to ensure the taxpayer is current and compliant with all tax obligations.  If the taxpayer is not current & compliant, the offer will likely be returned, and the taxpayer will not have appeal rights.  Thereafter, the offer will be forwarded to an offer examiner who at some point in time will contact the taxpayer or the taxpayer’s Power of Attorney.  The examiner may or may not request additional information and could issue an immediate determination of which must go through their manager for review and final acceptance.  It is fairly typical for the examiner to request additional information, updated information and/or have some questions.

The examiner will eventually issue a determination in writing.  This determination has four potential outcomes.  One, the offer could be returned, which generally only occurs when the taxpayer is not in compliance or has not made one of the appropriate payments.  Two, the offer could be accepted as proposed.  Three, the offer examiner may state that the offer cannot be accepted at the amount proposed (is actually rejected), but if the taxpayer increases their offer amount to a specific figure, they will recommend acceptance.  Four, the offer is rejected because the examiner feels the taxpayer has the ability to satisfy the tax liability in full.

Outcome one is bad as you have no appeal rights with the IRS Appeals Office and your only real option is to resubmit another offer.  Outcome two is wonderful- your offer has been accepted and you can settle your tax debt!  Outcome three may be great or maybe not great as it will depend upon how much the examiner has requested you increase your offer amount too.  Outcome four, may be disappointing but is not the end of the road.  If your offer is rejected under outcomes three or four above, you can still provide additional information to the examiner for reconsideration and often I have seen a successful outcome with the examiner after an initial rejection.  Even if the examiner and offer unit will not change their initial position and rejection determination, you have the right to request an appeal of their decision with the IRS Appeals Office.  Again, I have submitted and negotiated offers that were initially rejected, but later accepted through an appeal.  Thus, if you offer is initially rejected, do not lose hope!

Other Important Issues & Considerations Regarding an Offer

When considering whether or not to submit an offer to the IRS, you should know that although, there is a stay of enforcement while the offer is being reviewed, penalty and interest will continue to accrue, and the collection statute is tolled (is not running).  Thus, I would only recommend submitting an offer of which has at least a realistic possibility of being accepted, if not better.

If your offer is accepted, recently the IRS has been releasing the federal tax liens within 30 days of the offer amount being paid.  However, in addition to paying the offer amount that you have agreed to pay, you must also remain current and compliant for generally a five year period following acceptance of the offer.  Thus, the failure to timely pay taxes or file a return could cause the offer to default.  If the offer defaulted, you would be responsible for the unpaid debt, along with penalty and interest.

If you are questioning your ability to settle your tax liability with an offer in compromise, please consider speaking with a tax attorney at The McGuire Law Firm.  A free consultation is offered to all potential clients, and a reasonable fee may be worth having an experienced tax attorney prepare the documents and negotiate with the IRS.

The McGuire Law Firm has law offices in Denver and Golden Colorado, and offers a free consultation to all potential clients.

Contact The McGuire Law Firm to schedule a consultation with a tax attorney in Denver or Golden, Colorado.