OIC – Slashing Tax


Today TaxMama® hears from Sallie in the TaxQuips Forum who is puzzled. “I am trying to prepare an offer in compromise. When I go through the computations in the updated Form 656 package, the offer amount equals more than the tax they owe! I’m missing something. Please help.”

Ask TaxMama

Hi Sallie,

What you’re saying is, that when you go through all the client’s assets, and their future earnings, they are worth more than the taxes they owe?

That means, according to IRS standards, they don’t qualify for the offer in compromise. It means they have enough assets and/or income coming in in the next few years to fully pay their taxes.

Instead, set them up on an installment agreement (IA). The IA doesn’t take assets into account, only current income and net cash flow. They may qualify for a low monthly installment payment based on their cash flow. Try that instead.

And remember, you can find answers to all kinds of questions about offers in compromise and other tax issues, free. Where? Where else? At www.TaxMama.com.

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One thought on “OIC – Slashing Tax

  1. Mort Kafrissen says:

    I have prepared about 8 or 10 OIC applications for taxpayers who
    owe substantial tax and would like to settle for around half of
    the total amount due. My experience is that IRS will reject all
    offers especially if the taxpayer has an income over $100,000.
    Instead these individuals will wind up on an installment agreement
    to pay between $1,500 to $3,000 per month. Those ads on TV
    are somewhat misleading in that someone who settled for 10% of
    the tax due probably had little or no assets, huge debts, and very
    limited future income.

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