Can I Do An Offer In Compromise Myself?

Can I Do An Offer In Compromise Myself?

When it comes to dealing with the IRS, most people would rather not go it alone. After all, the tax code is complicated enough as it is! But when it comes to an Offer in Compromise (OIC), some taxpayers feel like they can save themselves some money by handling the negotiation on their own. So, can you do an OIC yourself? Let's take a look.

Unless you have a strong case and are diligent in following rules and procedures, an Offer in Compromise is not likely the best option for you. The main issue with pursuing this avenue is that it subjects you to something very similar to an audit of your income and assets. You cannot simply tell the IRS that you cannot pay your tax debt – you must be able to prove it.

People who try to settle their tax debts with the IRS often offer too much money. The reason the IRS accept some of these offers is that they are beneficial to the agency. When taxpayers don't have a good legal team, the IRS tends to take advantage.

An offer in compromise (OIC) is a settlement with the Internal Revenue Service (IRS) to resolve your past due taxes for less than what you owe. It is designed to give taxpayers who find themselves in a financially difficult spot with the IRS a chance to make things right within their budget.

To be considered for this program, you must fill out an application and provide evidence of your financial situation. The application outlines factors such as assets and income, expenses, ability to pay, special circumstances that could help explain why full payment isn't possible, and the amount being offered as a settlement.

The IRS will review your OIC application and evaluate it based on your assets, income, expenses, and reasonable collection potential from current resources. Once the evaluation is complete and approved by the IRS, you would make the agreed-upon settlement amount, plus applicable fees and interest if necessary.

An OIC can lead to significant savings for those taxpayers who are facing their debt with honesty and a willingness to do their best even when financial times are tough. With an Offer In Compromise in place, you can start getting back on track financially while satisfying your tax obligations. Getting started on this process allows you peace of mind with solving some tax challenges that were once overwhelming.

Application For An IRS Offer In Compromise

Application For An IRS Offer In Compromise

There are three components to an application for an IRS offer in compromise:

  1. If you're questioning if the amount of tax debt is yours or if it exists at all, you can also file Form 656-L.
  2. The $205 application fee is non-refundable but may be waived if your income falls below the IRS low-income guideline.s.
  3. The payment you sent will be applied to your new balance.

Applying for an offer in compromise from the IRS requires that you provide detailed information about your monthly income and expenses, as well as any assets, cash, or other debt you may have.

A tax professional can help you with paperwork, but it's not necessary, and you might end up spending more money on their services than you would save on your taxes.

Can I Do An Offer In Compromise Myself?

Mistakes To Avoid When Filling Out OIC Forms

Although they may seem small and unimportant, there are several errors that people commonly make on OIC forms which can have large consequences. These mistakes might only lead to confusion and a delay in the case until the mistake could be sorted out.

However, other times these same mistakes would cause the offer to be rejected immediately. Regardless of the outcome, both you and your client lose time and money when either of these things happens. To save yourself the time, money, and anguish of making such errors, let's go over a few common mistakes, why they're damaging, and how you can avoid them. These are the most common mistakes that need to avoid:


Many tax professionals make mistakes with math, but it's not because they're bad at math. Filling out Form 433 is complicated, requiring the juggling of dozens of numbers along with explanations and documentation. It's no wonder that sometimes things get forgotten.

If an error does occur--like a wrong value for a quick sale or an incorrect calculation of expenses--the OIC process will grind to a halt until the mistake is fixed.

Leaving Blank Spaces

Without any indication, it's frequently unknown why a practitioner left a field blank on either a 433 or 656. Is the reason because it doesn't apply to the taxpayer? Because they don't understand how to answer?

It's always a disappointment when something small can ruin a big decision, but sadly, it happens more often than one would like. The best way to prevent this from happening is by writing "N/A" or zero in any spaces that don't apply to the taxpayer.

Negative Value

A common error occurs when a taxpayer's property is valued at less than what they owe on the mortgage. To calculate the amount of equity the taxpayer has, the practitioner would subtract negative equity from net realizable equity (NRE). However, you cannot do that as it may seem beneficial to your client. Any asset worth less than what is owed on it should be reported as having zero equity.

Can You File An Appeal If Your Offer In Compromise Is Rejected?

Can You File An Appeal If Your Offer In Compromise Is Rejected?

If you disagree with the IRS's decision to reject your Offer in Compromise (OIC), don't give up hope just yet. At the same time that you receive a rejection letter from the IRS, you'll also receive instructions for filing an appeal. You must do so within 30 days of receiving the denial letter if you wish to pursue this option.

During this appeal, your case will be reviewed by another offers specialist to make sure the previous OIC examiner followed IRS protocols and applied all applicable laws correctly. Alternatively, you may decide to file an Offer in Compromise again and request reconsideration without first submitting an appeal.

Note that these two options are mutually exclusive--you can only choose one or the other--so carefully consider which path provides a better chance of success before you move forward. No matter which avenue is chosen, filing an appeal or re-filing for reconsideration is never a guarantee that your Offer in compromise will be accepted, but it will at least provide another opportunity to get your taxes resolved on more acceptable terms.

How Can I Increase The Chance Of My Offer In Compromise Being Approved?

An Offer in Compromise is one way of reducing tax liability, so long as several conditions are met. It's important that before applying, filers take all the necessary steps to ensure their Offer in Compromise has the highest chance of being accepted.

The IRS recommends that individuals have filed all required tax returns, made any estimated payments due, and, if requesting a reduction for the current year, they should also have an extension valid for its duration.

Additionally, those filing an Offer in Compromise should not be in the midst of bankruptcy proceedings. If those criteria are satisfied, then individuals can proceed to submit their application with considerable confidence that it will likely be approved by the IRS. This knowledge ensures that potential filers are prepared to act promptly and efficiently should they find themselves unable to fully pay back taxes owed to the government.

Following these steps increases the likelihood that an Offer in Compromise will be accepted and makes it easier for taxpayers to take control of their debt situation without undue stress or worry.

Other options

Although an offer in compromise may not always work, the Internal Revenue Service offers other avenues for finding tax relief. You have the option to set up an installment plan or request "currently not collectible" status from your creditors.

Find a tax relief company that's right for you. Ideal Tax Solutions specializes in helping individuals get out of debt and find financial freedom. They can help you understand your options, negotiate with the IRS, and make a plan to get back on track. Contact Ideal Tax today to learn more about their services. With Ideal Tax Solutions, you can trust that experienced professionals are fighting for your best interests as they work with you to create a debt relief plan that works.