Brandon Metcalfe
Phoenix Arizona Tax Attorney
As a dedicated Phoenix tax attorney specializing in offers in compromise with the IRS, I understand how overwhelming and stressful facing tax issues can be. I want to assure you that you're not alone in this journey. My commitment is to provide you with compassionate, expert guidance to navigate through the process smoothly and fearlessly. With a deep understanding of the complexities involved, I'll work closely with you to develop a strategy that aims to resolve your tax concerns in the most beneficial way possible. Let me help you move forward with confidence, ensuring a painless path towards financial peace.
Offer in Compromise
with the IRS
An Offer in Compromise (OIC) with the IRS is an agreement that allows taxpayers to settle their tax debt for less than the full amount owed. It's considered a viable option for individuals who cannot pay their full tax liability, or if doing so would create financial hardship, taking into account the taxpayer's ability to pay, income, expenses, and asset equity. The IRS typically approves an OIC when it represents the most the agency expects to collect within a reasonable period. Before applying, all other payment options should be explored, as the OIC program is not suitable for everyone​ (IRS.gov)​.
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To be eligible for an OIC, applicants must have filed all required tax returns, made all required estimated tax payments for the current year, not be in an open bankruptcy proceeding, and if applying for the current year, have a valid extension. Additionally, employers must have made tax deposits for the current and past two quarters before applying​ (IRS.gov)​.
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There are several reasons the IRS may accept an OIC: if there's doubt as to the liability of the tax debt; if there's doubt as to collectability, meaning the IRS believes the taxpayer's assets and income are insufficient to pay the full debt; or based on effective tax administration, where collecting the full amount would either create economic hardship for the taxpayer or would be unfair and inequitable due to exceptional circumstances​ (IRS.gov)​.
Applicants must submit IRS Forms 433-A and 656, and, in certain cases, Form 656-L. A non-refundable $205 application fee is required, but it may be waived for qualifying low-income applicants. Additionally, a payment toward the proposed new balance due must accompany the application. The IRS uses the information provided to assess the taxpayer's "reasonable collection potential" or RCP, to determine whether to accept the offer. This evaluation includes the taxpayer's assets, income, expenses, and future earning potential​ (NerdWallet)​.
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Despite the benefits, securing an OIC is challenging. For instance, in 2022, the IRS accepted 13,165 offers out of 36,022, illustrating the program's competitive nature. Applicants should consider consulting a tax professional to navigate the complexities of the application process and improve their chances of acceptance​ (NerdWallet)​.
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