In most cases, the IRS takes about six months to decide whether to accept or reject your offer in compromise. However, if you have to dispute or appeal their decision, the process can take much longer.
If the IRS rejects your offer
the rejection, but must do so within 30 days of the date of the IRS's rejection letter.
Upon receipt of your OIC, you should receive an acknowledgment letter within 2 to 4 weeks. Generally, we will have a decision within 4 to 6 months of your account being assigned to a specialist.
Processing times vary, but you can expect the IRS to take at least six months to decide whether to accept or reject your Offer in Compromise (OIC). The process can take much longer if you have to dispute the examiner's findings or appeal their decision.
In most cases, the IRS won't accept an OIC unless the amount offered by a taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer's ability to pay.
A rarity: IRS OIC applications and acceptances for 2010-2019 In 2019, the IRS accepted 33% of all OICs. There are two main reasons that the IRS may not accept your doubt as to collectibility OIC: You don't qualify. You can't pay the calculated offer amount.
But statistically, the odds of getting an IRS offer in compromise are pretty low. In fact, the IRS rejected 67% of all applications for offers in compromise in 2019. It's not impossible, though.
Each year, the Internal Revenue Service (IRS) approves countless Offers in Compromise with taxpayers regarding their past-due tax payments. Basically, the IRS decreases the tax obligation debt owed by a taxpayer in exchange for a lump-sum settlement. The average Offer in Compromise the IRS approved in 2020 was $16,176.
An Offer in Compromise is a special IRS tax relief program that lets you resolve your entire tax debt for less than the total tax amount you owe. Once your OIC has been accepted, you need to make sure you don't default on its ongoing requirements to prevent the IRS from collecting the money again that the OIC forgave.
Remember to mail your appeal to the office that sent you the rejection letter. You can request an Appeals conference by preparing either a Form 13711, Request for Appeal of Offer in CompromisePDF, or a separate letter with the following information: Name, address, Tax Identification Number and daytime telephone number.
To check the status of your OIC once it has been submitted, please call 1-877-252-3052 between the hours of 8am-5pm EST Monday through Friday.
Currently, the IRS offer in compromise programs does not affect your credit score. However, if you're considering filing for bankruptcy then it will likely have an adverse effect on your credit score and there are other factors that can also negatively impact a person's number (late payments, loans, etc).
If the IRS accepts an offer in compromise, settling a tax debt takes 6 to 8 months. If the agency rejects the offer, then accepts it on appeal, the process takes 8 to 12 months.
One can submit more than one Offer in Compromise for consideration by the IRS. There is no minimum wait time between Offer submissions. Why would one want to do that?
Tax attorney Beverly Winstead says there are many aspects of negotiating with the IRS you can do yourself, but there are some situations where a professional can help.
The IRS can file a tax lien even if you have an agreement to pay the IRS. IRS business rules say that a tax lien won't be filed if you owe less than $10,000.
Your work isn't done once you've paid off your OIC. There are strings attached to using the OIC program, and one of them is a promise to stay in tax compliance for the next five years. That means you need to file all of your returns on time and make all required tax payments for the next five years.
There are 2 basic Offer in Compromise formulas:
On a 5-month repayment plan: (Available Monthly Income x 12) + Value of Personal Assets. On a 24-month repayment plan: (Available Monthly Income x 24) + Value of Personal Assets.
Section 1872 of the CUIC states a denial of an Offer in Compromise “shall not be subject to administrative appeal or judicial review.” You may reapply in six months if a substantial and permanent change to your financial situation occurs.
People who qualify for the program
Having IRS debt of fifty thousand dollars or less, or the ability to repay most of the amount. Being able to repay the debt over a span of 5 years or less. Not having fallen behind on IRS tax payments before. Being ready to pay as per the direct payment structure.
An IRS levy permits the legal seizure of your property to satisfy a tax debt. It can garnish wages, take money in your bank or other financial account, seize and sell your vehicle(s), real estate and other personal property.
If you owe more than $50,000, you may still qualify for an installment agreement, but you will need to complete a Collection Information Statement, Form 433-A. The IRS offers various electronic payment options to make a full or partial payment with your tax return.
The average attorney fees for an offer in compromise fall between $3,500 and $6,500, although using an attorney that charges an hourly rate could result in a higher cost.
Taxpayers can't always come up with the OIC offer amount. In 2020, the IRS released final regulations that increased the OIC user fee to $205 from $186. While a 10% increase may seem like a lot, it's only a small part of the potential cost of an OIC. The user fee usually does deter many people from applying for an OIC.
One-time forgiveness, otherwise known as penalty abatement, is an IRS program that waives any penalties facing taxpayers who have made an error in filing an income tax return or paying on time. This program isn't for you if you're notoriously late on filing taxes or have multiple unresolved penalties.