A compromise offer is when the IRS allows you to pay your federal tax debt for less than you owe. Many (but not all) states will also allow you to make concessions when it comes to your taxes. An IRS compromise offer allows a taxpayer to make an offer for less than the total amount due on their tax bill. If the IRS accepts the offer, you pay less than you owe and the IRS erases the rest of the tax debt.
Occasionally, the IRS allows taxpayers to settle their tax bills for less than the total amount of back taxes due. This is called an offer of commitment (OIC). An offer of commitment (OIC) is an agreement between you and the IRS to pay less than you owe in taxes. In many cases, it can be a valid settlement option if you can't pay the taxes due in full or if doing so causes financial difficulties.
Both individuals and companies may qualify for an ICO, but you are not guaranteed to be eligible. There are three main situations where you might be eligible to settle your tax bill for less than your entire tax liability, and each of them has different requirements. This tax resolution program is for people who can't pay both their tax debt and their living expenses. Other tax relief companies may promise to reach an agreement in advance even before taking into account your real numbers, only to have the IRS deny it and you will continue to pay a hefty fee.
Find out step by step how to calculate a transaction offer and find out if it is possible to reach a tax agreement for your situation. After payment, you are in good standing and you don't owe anything else during the tax period in which your tax debt was settled. Completing the tax returns and requests necessary to obtain a commitment offer on your own is entirely possible; however, it is complicated and can require a considerable amount of time and tax knowledge. If you have legitimate doubts about the amount of taxes due, you may be able to reduce your taxes by offering a transaction based on liability concerns.
In some cases, an OIC is returned to the taxpayer rather than rejected, because the taxpayer did not submit the necessary information, filed for bankruptcy, did not include the required application fee or non-refundable payment in the offer, did not file the required tax returns, or did not pay current tax obligations at the time the IRS considered the offer. If you agree with the rejection, you can send the full payment of your tax debt to avoid additional interest and penalties, or request an installment agreement to pay your tax debt. A transactional state tax offer is one in which the state agrees to allow you to pay your state taxes for less than what you owe.