You must include 20% of the offer amount in your request (in addition to the application fee). This money is not refundable, even if the IRS rejects your offer (the IRS will only apply it to your tax bill). If your offer is not accepted and you have not incurred any additional tax debt, your installment agreement with the IRS will be reinstated at no additional charge. Most people will not qualify for an OIC unless they have filed all tax returns and made all the estimated tax payments required for the current year (if applicable).
The IRS can file or maintain current tax liens until it accepts your offer and you have fulfilled your end of the deal. The partial installment agreement allows you to pay the IRS monthly, but your full payment will not cover your full tax bill before the collection law expires. The OIC, out of doubt as to collectability, is for people who are unlikely to be able to pay the IRS before their collection statute expires (usually 10 years after the date the IRS evaluates the tax). As part of the accepted offering agreement, the IRS will keep any refund, including interest, of taxes due until the date the IRS accepts the offer.
A transaction offer (with doubts as to the possibility of collecting it) to the IRS must be equal to or greater than what the IRS calculates as the taxpayer's reasonable collection potential. Jim is also the author of the Tax Problems and Solutions Manual, a publication intended to help tax professionals work more effectively on post-tax issues and to resolve their clients' most common tax problems. You can designate in writing which tax debt you would like to apply the payments for your offer to when the offer is submitted or when the payment is made. Most people think that the IRS is haggling with taxpayers about how much it will take to settle the tax bill.
A transaction offer is a great way to resolve your tax debt when there are reasonable doubts about your ability to fully pay off the debt before it matures. A tax professional can advise you on how to approach the appeal process, since you may have several options for doing so (including the United States Tax Court and the IRS Independent Appeals Office). The IRS can also accept an OCI in other circumstances, such as if there are “doubts about liability,” if paying the full tax bill would create financial difficulties, or when exceptional circumstances would make paying the entire tax bill unfair and inequitable. If you qualify for an OCI, the IRS will then determine how much it will accept from you to pay off the debt.
Prior to his current position, Jim's consulting practice focused on the areas of tax controversy and tax administration, including leading the development of tax problem software products for tax professionals, testifying before Congress, advocating for the transparency and efficiency of the IRS, and propose innovative solutions and large-scale solutions for taxpayers and tax professionals. The refund that is withheld as part of the offer agreement applies to the total tax debt and is not considered a payment of the amount of the accepted offer.
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