Offer In Compromise - Frequently
Asked Questions
Offer In Compromise - Frequently
Asked Questions - Application Fee
- What is an offer in
compromise user or application fee?
- How much is the
application fee and when does it begin?
- Who will have to pay
this application fee?
- What method of payment
does the IRS accept?
- Can I send cash as
payment for the application fee?
- Can I send one check to
cover both the application fee and OIC amount?
- Can a tax practitioner
who represents a number of clients and files multiple OICs
combine several application fees into one check?
- What happens if I submit
an application fee and find that I have insufficient funds in my
account to cover the check?
- Will payment of the
application fee reduce the OIC amount?
- Will the application fee
create an additional financial hardship on taxpayers who are
already having payment problems?
- (Revised 8/2004)
What does the IRS review
when I submit my "Offer in Compromise," Form 656?
- What happens to my fee
if the OIC is considered not processable?
- (Revised 8/2004)
Why does the IRS require the
July 2004 version of Form 656, "Offer in Compromise," package?
- (Revised 8/2004)
How do I know if I qualify
for the income exception?
- (Revised 8/2004)
What do I need to do if the OIC
Application Fee Worksheet shows that I qualify for the income
exception?
- What happens if I submit
the Form 656-A and the IRS later says I made an error and do not
qualify for the poverty guideline exception?
- Does the poverty
guideline exception apply to businesses?
- What happens if I do not
submit the OIC application fee with the OIC Form 656?
- How is the application
fee collected?
- How many Forms 656 must
I complete if my spouse and I are submitting one offer to
compromise the same joint liability? How many application fees
must be attached?
- How many Forms 656
should be filed when the taxpayers are divorced, separated,
or/married, but living apart? How many fees must be attached in
these situations?
- When a married couple
owes a joint liability and one spouse also owes an individual
(non-joint) liability, how many Forms 656 are required?
- How many Forms 656 are
required from a married couple who owe joint income tax, plus
the husband owes an individual year before he was married and a
business liability, and the wife owes an individual year with
her prior spouse? How many application fees will be required?
- How many Forms 656 are
required if you have an individual who owes tax and who also
owes a partnership debt as a general partner or corporate debt
from a closely held corporation? How much would the application
fee be?
- What will happen if the
IRS accepts an OIC for processing, along with the $150
application fee, but then requests additional Forms 656 be
submitted with additional $150 fees, and the taxpayer fails to
respond?
- What happens to the Form
656 and application fee after I send it to the IRS?
- Are there any instances
when the application fee will be applied against the amount of
the offer or refunded to me after the OIC has been accepted for
processing?
- What if my OIC is not
accepted, will the application fee be refunded to me?
- (Revised 8/2004)
Where can I find more
information on the OIC application fee?
Offer in Compromise - Frequently Asked Questions -
Processing Your OIC
Offer in Compromise - Frequently
Asked Questions - Offer Determinations
General
What is an Offer
in Compromise?
An offer in compromise (OIC) is an
agreement between a taxpayer and the Internal Revenue Service (IRS)
that resolves the taxpayer's tax liability. The IRS has the
authority to settle, or compromise, federal tax liabilities by
accepting less than full payment under certain circumstances. The
IRS may legally compromise for one of the following reasons:
-
Doubt as to Liability: Doubt
exists that the assessed tax is correct.
-
Doubt as to Collectibility:
Doubt exists that the taxpayer could ever pay the full
amount of tax owed. The minimum offer amount must generally
be equal to (or greater than) the taxpayer's reasonable
collection potential (RCP). The RCP is defined as the total
of the taxpayer's realizable value in real and personal
assets, plus his/her future income.
Note: Unless the taxpayer files
an OIC claiming special circumstances, the offered amount must
equal or exceed the reasonable collection potential. Realizable
value is the asset's quick sale value (amount which could be
reasonably expected through the sale of the asset) minus what
the taxpayer owes to a secured creditor.
- Effective Tax Administration:
There is no doubt that the tax is correct and no doubt that the
amount owed could be collected in full, but exceptional
circumstances exist such that collection of the full amount
would create economic hardship or where compelling public policy
or equity considerations provide sufficient basis for
compromise. The taxpayer bears the burden of proof to show
their OIC qualifies for public policy or equity considerations.
They must show that their circumstances are compelling enough to
justify acceptance of their OIC compared to other taxpayers in
similar circumstances.
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(REVISED 8/2004) What are
the requirements for an OIC?
In order to be considered for an OIC, a taxpayer must meet all of
the following requirements:
- Used the most current version of Form
656, "Offer in Compromise," dated July 2004 and Forms 433-A and
433-B, "Collection Information Statements, “ dated May 2001;
- Submitted the $150 application fee, or
Form 656-A, "Income Certification for Offer in Compromise
Application Fee," with the Form 656;
- Filed all required federal tax
returns;
- Filed and paid any required employment
tax returns on time for the two quarters prior to filing the OIC,
and is current with deposits for the quarter in which the offer
in compromise was submitted; and
- Is not a debtor in a bankruptcy case.
Taxpayers must comply with all federal tax
filing and paying requirements for a period of five years following
acceptance of their OIC, or until the OIC is paid in full, whichever
is longer. This also includes making required estimated tax payments
and federal tax deposits.
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(REVISED 8/2004) How do I
complete an OIC?
First obtain a
Form 656,
Offer in Compromise package (Version 7/2004). The package includes
information and instructions for completing the form, as well as a
worksheet that can be used to calculate an amount to offer. Form
433-A, Collection Information Statement for Wage Earners and
Self-Employed Individuals, and Form 433-B, Collection Information
Statement for Businesses (Version 5/2001), are included in the Form
656 package and may need to be completed as well depending upon each
individual situation. Taxpayers will need to review and include
amounts for items such as housing and utilities from the
Collection Financial Standards,
and
Necessary Expenses,
to complete their collection information statement(s).
NOTE: For corporations and
partnerships, Form 433-A may be requested from corporate officers
and individual partners.
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When does a Form 433, Collection
Information Statement, need to be completed?
Collection Information Statement(s) are required for doubt as to
collectibility and effective tax administration OICs, and doubt as
to liability involving Trust Fund Recovery Penalty assessments.
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Are the forms available on-line?
Yes. The
forms needed to complete an OIC
are available on-line. Also, forms may be obtained by calling
1-800-829-3676 or by visiting a local IRS office.
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(REVISED 8/2004) What
forms are submitted to request an effective tax administration OIC?
To receive consideration on this basis, a taxpayer must
submit:
- The July 2004 version of Form 656,
"Offer in Compromise"
- The May 2001 version of the
"Collection Information Statement" (Form 433-A and/or Form
433-B)
- A detailed written narrative must be
documented on Form 656, Item 9. The narrative must explain the
exceptional circumstances and why payment of the tax liability
in full would either create an economic hardship or demonstrate
why there is compelling public policy or equity considerations
sufficient to support an acceptance recommendation. The taxpayer
bears the burden of proof to show their OIC qualifies for public
policy or equity considerations. They must show that their
circumstances are compelling enough to justify acceptance of
their OIC compared to other taxpayers in similar circumstances.
If a taxpayer requests consideration on the
basis of effective tax administration, the IRS must first establish
that no doubt as to liability and no doubt as to collectibility
conditions exist. Hence, an OIC filed under effective tax
administration can only be considered once the IRS determines that
the tax liability is correct and collectible in full.
Once the IRS begins the process of processing the OIC under the
effective tax administration guidelines, it will consider such
issues as the taxpayer's overall history of filing and paying taxes,
as well as the overall impact on voluntary compliance.
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I qualify for an installment
agreement, can I still submit an OIC?
If a tax liability can be paid in a lump sum or through an
installment agreement, taxpayers will not be considered for an OIC.
If an OIC is received, it will be rejected with appeal rights. The
only exception is if a taxpayer requests an OIC under the effective
tax administration provision.
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The IRS recently levied my bank
account. Will the levy proceeds be returned if I file an offer in
compromise?
The IRS will keep all payments and credits made, received
or applied to the total original tax liability before the OIC was
submitted. The IRS may also keep any proceeds from a levy that was
served prior to the submission of an OIC, but which were not
received at the time the OIC was submitted. Refer to
OIC Contractual Terms,
Item (f).
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Can I stop sending payments as part of
my approved installment agreement once I file an offer in
compromise?
No. Installment agreement payments must be continued while
the OIC is being considered. Installment agreement payments will
not be applied against the amount you offered. Refer to
OIC Contractual Terms,
Item (f).
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Can taxes be settled by offering
pennies on the dollar?
OICs must include an amount equal to or greater than the
total value of all assets, plus future income. That total is
generally the reasonable collection potential amount, and not simply
an offer of ten cents on the dollar, or a percentage of the debt. A
consumer alert
has been issued advising taxpayers to beware of promoters' claims
that tax debts can be settled for "pennies on the dollar." The IRS
cautions that the OIC program is not designated to be a program for
everyone with financial problems, and it should not be viewed as an
invitation to avoid paying taxes.
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Can I file an offer in compromise to
delay collection action?
Once it is determined an OIC was filed solely to hinder
and/or delay collection actions, the IRS will return the OIC without
any further consideration. Taxpayers will not be afforded the right
to appeal this decision.
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Application Fee
What is an offer in compromise user or application fee?
Federal agencies are authorized to establish charges
for services provided by the agency, called "user fees." The
U.S. Office of Management and Budget encourages agencies to
implement these fees to recover the cost of providing special
services to some recipients that others do not use. Accordingly,
the IRS has established a user fee that will recover part of the
cost of processing and reviewing offer in compromise requests.
The IRS has chosen to call it an "application fee" because the
fee is required when an OIC application is submitted for
consideration.
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How much is the application fee and
when does it begin?
The application fee for submitting an OIC is $150 and will
be required on all offers that are postmarked November 1, 2003, and
thereafter.
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Who will have to pay this
application fee?
All taxpayers who submit a Form 656, "Offer in Compromise,"
postmarked November 1, 2003, and thereafter, must pay the $150 fee,
except in two instances:
- The OIC is submitted based solely on
"doubt as to liability;" or
- The taxpayer's total monthly income
falls at or below income levels based on the Department of
Health and Human Services (DHSS) poverty guidelines.
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What method of payment does the IRS
accept?
A check or money order made payable to the United States Treasury.
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Can I send cash as payment for the
application fee?
No. Taxpayers must send a check or money order for $150 made payable
to the United States Treasury.
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Can I send one check to cover both
the application fee and
OIC amount?
No. Taxpayers must initially pay the
application fee. After the IRS accepts the offer, the IRS will
notify the taxpayer to promptly pay any unpaid amounts that
become due under the terms of the offer agreement.
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Can a tax practitioner who
represents a number of clients and files multiple OICs combine
several application fees into one check?
No. Checks that combine application fees for several
offers will not be accepted, and the offers will be returned.
Each Form 656 must have a separate check attached.
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What happens if I submit an
application fee and find that I have insufficient funds in my
account to cover the check?
If we receive notification of insufficient funds, the IRS will
immediately stop processing the Form 656 and the OIC will be
returned to the taxpayer without any further consideration.
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Will payment of the application
fee reduce the OIC amount?
The application fee is in addition to the amount listed on Form
656, Item 7. However, when the IRS determines the acceptable
amount of an OIC based on doubt as to collectibility, it
considers the value of all of the taxpayer's assets. Because
some of the taxpayer's assets were used to pay the OIC
application fee, payment of the fee will reduce the acceptable
amount of the OIC. The taxpayer therefore pays no more for an
OIC with the fee than the taxpayer would have paid without the
fee.
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Will the application fee create
an additional financial hardship on taxpayers who are already
having payment problems?
Because payment of the fee reduces the acceptable OIC amount,
most taxpayers will not experience any additional financial
hardship as a result of the fee. However, for some taxpayers the
$150 fee may exceed their ability to pay. The IRS believes that
the exception to the fee for taxpayers whose income is at or
below poverty will protect such taxpayers. The IRS intends to
monitor this issue and adjust the amount of the exception if it
appears there are a number of taxpayers who cannot pay even the
amount of the fee for an OIC.
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(REVISED 8/2004)
What
does the IRS review when I submit my OIC, Form 656?
The IRS first reviews an OIC to see if it is "processable."
Processable is the term the IRS applies to those OICs that have
met certain criteria. An OIC is processable if the taxpayer:
- Used the most current versions of Form
656, “Offer in Compromise” and Forms 433-A and 433-B,
“Collection Information Statements." The most current versions
are: Form 656 (7/2004) and Forms 433-A and 433-B (5/2001);
- Submitted the $150 application fee, or
Form 656-A, “Income Certification for Offer in Compromise
Application Fee” with the Form 656;
- Filed all required federal tax
returns;
- Filed and paid any required employment
tax returns on time for the two quarters prior to filing the OIC,
and is current with deposits for the quarter in which the offer
in compromise was submitted; and
- Is not a debtor in a bankruptcy case.
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What happens to my fee if the OIC
is not considered processable?
The application fee will be returned to the taxpayer if the OIC is
determined not to be processable.
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(REVISED 8/2004) Why does
the IRS require the July 2004 version of Form 656, “Offer in
Compromise” package?
The July 2004 version of the Form 656
package was redesigned in order to assist taxpayers in the correct
preparation of an OIC application, as well as reduce the burden
associated with the process. The package contains the offer in
compromise, instructions, Forms 433-A and 433-B, and a worksheet to
help calculate the offer amount. A new addition is a processability
checklist that helps taxpayers determine if they meet the
eligibility requirements to submit an offer. The forms prompt
taxpayers to attach necessary financial documents needed in the
processing of the offer.
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(REVISED 8/2004)
How do I
know if I qualify for the income exception?
The IRS developed an
“Offer in Compromise Application Fee
Worksheet” found in the Form 656
package to assist taxpayers in determining whether they qualify for
the income exception. If they determine that they qualify,
taxpayers must complete Form 656-A “Income Certification for Offer
in Compromise Application Fee,” and attach it along with the
worksheet to the Form 656 at the time of submission.
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(REVISED 8/2004) What do I
need to do if the OIC Application Fee Worksheet shows that I qualify
for the income exception?
Taxpayers must sign and date
Form 656-A (fill-in format)
"Income Certification for Offer in Compromise Application Fee." If a
taxpayer is submitting a joint OIC with a spouse, the spouse must
also sign the certification. The Income Certification must be
attached to Form 656. It is recommended that the Application Fee
Worksheet also be submitted.
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What happens if I submit the Form
656-A and the IRS later says I made an error and do not qualify for
the poverty guideline exception?
The IRS will return the OIC to the taxpayer without any further
processing.
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Does the poverty guideline
exception apply to businesses?
No. The exception for taxpayers with total monthly incomes falling
at or below income levels based on DHSS poverty guidelines only
applies to individuals. It does not apply to other entities, such as
corporations or partnerships.
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What happens if I do not submit the
OIC application fee with the OIC Form 656?
Unless the taxpayer has submitted an OIC under the doubt as to
liability provision, or attached Form 656-A, showing a poverty
guideline certification, the IRS will return the Form 656 as not
processable.
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How is the application fee
collected?
The application fee is collected when a taxpayer submits a Form
656. The general rule is that the IRS needs as many Forms 656 as
there are entities seeking to compromise. A check or money order in
the amount of $150 must be attached to each OIC.
[Note: This assumes that the taxpayer does
not meet one of the exceptions for paying the application fee: 1)
OIC filed solely under doubt as to liability, or 2) total monthly
income falls at or below income levels based on the DHSS poverty
guideline levels.]
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How many Forms 656 must I complete
if my spouse and I are submitting one offer to compromise the same
joint liability? How many application fees must be attached?
A married couple owing the same joint
income tax liability may file only one Form 656 listing the joint
liability. One fee of $150 should be attached to Form 656. A married
couple opting to file separate offers to compromise the same joint
liability may do so, but two $150 fees will be required.
[Note: This assumes that the taxpayers do
not meet one of the exceptions for paying the application fee: 1)
OIC filed solely under doubt as to liability, or 2) total monthly
income falls at or below income levels based on the DHSS poverty
guideline levels.]
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How many Forms 656 should be filed
when the taxpayers are divorced, separated, or/married, but living
apart? How many fees must be attached in these situations?
A divorced, separated, or
married couple living apart may still file one Form 656 listing
their joint liability and pay only one $150 fee, as long as all the
taxes owed are joint liabilities. Taxpayers in these situations that
opt to file separate offers must pay a $150 application fee for each
offer that is submitted for consideration.
[Note: This assumes that the
taxpayers do not meet one of the exceptions for paying the
application fee: 1) OIC filed solely under doubt as to liability, or
2) total monthly income falls at or below income levels based on the
DHSS poverty guideline levels.]
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When a married couple owes a joint
liability and one spouse also owes an individual (non-joint)
liability, how many Forms 656 are required?
Two OICs are needed. One for the joint
liability and another one for the individual (non-joint) liability.
A check or money order for $150 should accompany each Form 656.
[Note: This assumes that the taxpayers do
not meet one of the exceptions for paying the application fee: 1)
OIC filed solely under doubt as to liability, or 2) total monthly
income falls at or below income levels based on the DHSS poverty
guideline levels.]
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How many Forms 656 are required
from a married couple who owe joint income tax, plus the husband
owes an individual year before he was married and a business
liability, and the wife owes an individual year with her prior
spouse? How many application fees will be required?
In keeping with the “one fee
per entity” rule:
-
The husband should file one offer
listing the joint income tax, the individual year he owes
before the marriage and his business liability, and attach a
$150 application fee to the offer.
-
The wife should file an offer listing
the joint income tax and the individual year that she owes
with her prior spouse, and attach a $150 application fee to
the offer.
It does not matter that the
joint liability will appear on both offers.
[Note: This assumes that the
taxpayers do not meet one of the exceptions for paying the
application fee: 1) OIC filed solely under doubt as to liability, or
2) total monthly income falls at or below income levels based on the
DHSS poverty guideline levels.]
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How many Forms 656 are required if
you have an individual who owes tax and who also owes a partnership
debt as a general partner or corporate debt from a closely held
corporation? How much would the application fee be?
In this situation, two Forms 656 will be
required. One for the individual liability, and the other for the
partnership or corporate liability. A check or money order for $150
must be attached to each offer, for a total of $300. The IRS cannot
combine individual tax on an offer application with taxes owed by a
partnership or corporation.
[Note: This assumes that the taxpayers do
not meet one of the exceptions for paying the application fee: 1)
OIC filed solely under doubt as to liability, or 2) total monthly
income falls at or below income levels based on the DHSS poverty
guideline levels.]
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What will happen if the IRS accepts
an OIC for processing, along with the $150 application fee, but then
requests additional Forms 656 be submitted with additional $150
fees, and the taxpayer fails to respond?
Taxpayers are required to
submit one fee for each Form 656 taken in for processing. Failure
to submit additional Form 656 with the corresponding $150
application fee when requested, will cause the IRS to return the
offer without any further consideration. The $150 application fee
will be retained.
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What happens to the Form 656 and
application fee after I send it to the IRS?
The $150 is retained until the IRS determines whether the Form 656
is processable.
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Are there any instances when the
application fee will be applied against the amount of the offer or
refunded to me after the OIC has been accepted for processing?
Yes. The fee will be applied against the amount of the offer or, if
the taxpayer requests, returned to the taxpayer if:
- If the IRS accepts an OIC based on
effective tax administration
(ETA).
- If the IRS accepts an OIC based on a
determination of
doubt as to collectibility with special
circumstances.
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What if my OIC is not accepted,
will the application fee be refunded to me?
No. The IRS will retain the fee when:
- The taxpayer's initial OIC amount is
too low - based on the IRS evaluation of the taxpayer's
financial condition - and the taxpayer is given the opportunity
to increase it. If the taxpayer does not increase the OIC
amount, or show special circumstances, the IRS will reject the
Form 656;
- The taxpayer fails to submit
additional financial documents to assist in the IRS review. If
the taxpayer fails to respond, and/or submit the requested
information, the OIC will be returned without further
consideration; or
- The taxpayer chooses to withdraw the
Form 656.
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Where can I find more information
on the OIC application fee?
For additional information, see the OIC application fee final
regulations and Form 656-A, "Income Certification for Offer in
Compromise Application Fee."
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Processing Your OIC
What happens if an OIC is
submitted using the wrong forms?
The Form 656 and/or Forms 433 "Collection Information
Statements" are necessary to conduct an offer investigation.
Failure to submit these documents will cause considerable delay in
the process. Taxpayers wanting to pursue the OIC as a way to
satisfy their tax liability will have to submit the forms in order
to have the OIC reconsidered.
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Will the submission of inaccurate
Form 656 and Forms 433-A/B affect the timely disposition of my case?
Yes. The IRS' procedures require that a taxpayer be contacted in
writing and provided a one-time opportunity to correct the error(s),
and/or update the financial statement. Failure to correct the
error(s) and/or respond results in the OIC being returned to the
taxpayer without any further actions on the part of the IRS.
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What are the common errors when
preparing an offer in compromise?
The following are key items that require the IRS to request
corrections and delay the processing of OICs:
-
Incorrect address (don't use P.O. Box,
must use street address), Form 656, Item 1.
-
Taxpayer identification numbers
missing or incorrect on Form 656, Item 2.
-
EIN not included for an offer on a
sole proprietor liability, From 656, Item 3.
-
Tax liability periods/years missing on
Form 656, Item 5.
-
Tax periods included where no tax is
due, Form 656, Item 5.
-
Reason for compromise not checked,
Form 656, Item 6.
-
No "offer to pay" amount or an
inappropriate amount shown on Form 656, Item 7.
-
OIC includes joint liabilities without
signatures of both parties, Form 656, Item 11.
-
OIC includes single liabilities, but
has signatures of two parties.
-
OIC submitted by single taxpayer, but
includes joint liabilities.
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What happens if I miscalculate
my OIC or do not offer an amount equal to my reasonable
collection potential?
This will result in processing delays and could be
grounds for the IRS ultimate decision to reject an OIC. The IRS
is observing a large upsurge of receipts in which the offered
amount is clearly much lower than the reasonable collection
potential illustrated on the taxpayer's financial statement.
Furthermore, in a large number of these cases, the financial
statement also shows that the taxpayer has a clear ability to
satisfy the liability in full, or via an installment agreement
during the course of the collection statute, and the taxpayer
cites no special circumstances.
The IRS reviews OICs for indications of fraudulent intent.
Submitting an OIC with false information, or making a false
statement to an IRS employee, is considered an indicator of
fraud and may be subject to civil or criminal penalties.
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What are the National and Local
Standards and how are they considered in evaluating an OIC?
Collection Financial Standards are used to help
determine a taxpayer's ability to pay a delinquent tax
liability.
Allowances for food, clothing and other items, known as the
National Standards, apply nationwide, except for Alaska and
Hawaii, which have their own tables. Taxpayers are allowed the
total National Standards amount for their family size and income
level, without questioning amounts actually spent.
Maximum allowances for housing and utilities and transportation,
known as the Local Standards, vary by location. Unlike the
National Standards, the taxpayer is allowed the lesser of the
amount actually spent or the standard.
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OIC Determinations
What happens if the IRS accepts an OIC?
If an OIC is accepted, the following will apply:
-
The taxpayer must pay the OIC
amount as quickly as possible in accordance with the
acceptance agreement.
-
The IRS will keep any tax refund,
including interest due, as the result of an overpayment
of any tax or other liability for the tax period
extending through the calendar year the IRS accepts the
OIC. A taxpayer may not designate a refund and/or
overpayment to be applied to estimated tax payments for
the following year. This condition does not apply if the
OIC is based on Doubt as to Liability only.
-
The taxpayer will waive their
right to contest in court or otherwise, the amount of
the tax liability.
-
If a
Notice of Federal Tax Lien
has been filed against a taxpayer, the IRS will release
it when the payment terms of the OIC are satisfied.
The taxpayer must remain in compliance
with filing and payment of all tax returns for a period of five
years from the date the OIC is accepted or until the OIC is paid
in full, whichever is longer. Failure to pay the OIC on time,
and/or to remain in compliance during the five-year period or
until the OIC is paid in full, whichever is longer, will result
in the OIC being declared in default..
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What happens if the IRS does
not accept an OIC?
Once the IRS determines it cannot accept an offer, the
taxpayer will be advised of the reasons behind the decision.
The taxpayer will be afforded another opportunity to submit any
other information that might cause the IRS to reconsider it
preliminary decision to reject the offer. The exception to this
is when the taxpayer has an ability to satisfy the liability in
full and has not pointed to special circumstances.
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How much interest am I going to
pay if my OIC is accepted?
Interest will not accrue on the taxpayer's accepted OIC
amount from the date of acceptance until the OIC is paid.
Interest and penalties will continue to accrue on the unpaid tax
liability while the OIC is under consideration.
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Will I be entitled to receive
tax refunds if my OIC is accepted?
As additional consideration beyond the amount of the
taxpayer's offer, the IRS will keep any refund, including
interest due, because of an overpayment of any tax or other
liability, for tax periods extending through the calendar year
the IRS accepts an OIC. Refer to
OIC Contractual Terms,
Item (g).
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Can I designate any payments
once my OIC is accepted?
No. Refunds and overpayments may not be designated as
estimated tax payments for the following year. This condition
does not apply if the OIC was accepted under doubt as to
liability only. Refer to
OIC Contractual Terms
, Item (g).
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Is a tax lien released when an
OIC is accepted?
The IRS releases a Notice of Federal Tax Lien when all of the
OIC payment terms are satisfied. For an immediate release of a
lien, a taxpayer can submit payment using a certified check and
include a request letter.
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What happens if I do not meet
all the terms of my accepted OIC?
The IRS may default the OIC and reinstate the entire
tax liability, less all payments and credits received.
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(REVISED 8/2004)
What
happens if I default my OIC?
The IRS may take the following actions:
-
Immediately file suit to collect
the entire unpaid balance of the offer
-
Immediately file suit to collect
an amount equal to the original amount of the tax
liability as liquidating damages, minus any payment
already received under the terms of this offer
-
Disregard the amount of the offer
and apply all amounts already paid under the offer
against the original amount of the tax liability
-
File suit or levy to collect the
original amount of the tax liability, without further
notice of any kind
NOTE: The IRS will not
default an agreement when taxpayers have filed a joint OIC with
your spouse or ex-spouse, as long as you have kept, or are
keeping, all the terms of the agreement, even if your spouse or
ex-spouse violates the future compliance provision.
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What happens if I do not file
my tax return or pay my taxes next year?
The OIC will be defaulted. An OIC requires future compliance for
a period of five (5) years from the date of acceptance of the
OIC, or until the offered amount is paid in full, whichever is
longer. Compliance is the timely filing and paying of all
required returns and taxes.
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