Tax Settlements – Offer in Compromise

The Offer in Compromise (OIC) program has been around for many years as an option for taxpayers to settle their tax debt for less than the full amount. Some aspects of the OIC program have been updated under the “Fresh Start” initiative to make it easier for struggling taxpayers to meet the requirements for an accepted offer. At Montgomery & Wetenkamp, we provide complimentary evaluations to determine if your case is a candidate to be settled through an offer to compromise. Usually, for an offer to be accepted, taxpayers must prove that the IRS is never going to be able to collect more than what is being offered. This takes much more than simply filling out and filing the proper forms. In fact, most of the technical work and negotiations begin after the required forms have been filed. So, it’s important to have a skilled IRS tax attorney by your side. Our tax attorneys will work tirelessly to get you the tax relief you deserve.

How the IRS Evaluates an Offer in Compromise

When reviewing an OIC submission, the IRS does not simply look at how much you owe — they conduct a detailed analysis of your ability to pay. This includes examining your monthly income, allowable living expenses, available assets, and your “reasonable collection potential” over a set period of time. The IRS uses this calculation to determine the minimum offer amount they are likely to accept.

There are three grounds under which an OIC may be submitted: doubt as to collectibility, doubt as to liability, and effective tax administration. Most cases fall under doubt as to collectibility, meaning the taxpayer genuinely lacks the financial means to pay the full amount owed.

It is also important to understand that while your OIC is under IRS review, collection activity is generally suspended — giving you breathing room while your case is being evaluated. However, the IRS has up to two years to make a decision, and if no decision is reached within that window, the offer is automatically deemed accepted.