Pros And Cons Of The OIC Program

The Offer in Compromise program has a few negative aspects.   However, when you consider that an accepted offer settles the tax bill, and eliminates the tax problem, the positive seems to greatly outweigh the negative factors.

Positive

A successful Offer in Compromise (OIC) can provide significant benefits to the taxpayer. The key benefits of the program are:

• OIC presents an end to a long and intimidating financial problem;

• The IRS will hold collections while the program is being considered;

• Taxpayer is able to pay a reduced OIC amount compared to what was owed;

• Tax liens will be released once the OIC is completed;

• The program allows the taxpayer to stay out of bankruptcy, and even reduce taxes that would not have been dischargeable in bankruptcy;

Negative

The Offer in Compromise (OIC) process also has some negative aspects. The key negative features of the program are:

• The taxpayer must make a full financial disclosure to the government (this mainly pertains to OIC based on doubt to collectibility);

• The taxpayer will have to waive certain tax benefits if OIC is accepted;

• A federal Offer in Compromise does not resolve state taxes or any other debts;

• The taxpayer agrees to comply with all federal tax laws for the next five years following an acceptance of his OIC;

• The taxpayer waives certain refunds and credits;

• All accepted Offers are kept on public file in the District Office for at least one year

The offer program requires that subsequent to acceptance of an Offer in Compromise, the taxpayer must remain current on all tax obligations for a period five (5) years. Therefore, if the taxpayer’s OIC is accepted and paid in full, but he later fails to pay or file future income taxes or other taxes, the Offer will be revoked by the IRS.

Related Topic: Who Is Eligible