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Offer In Compromise


Definition of an Offer In Compromise


An offer in compromise or OIC is an IRS program which allows taxpayers to renegotiate a reduction for an unpaid tax amount owed.


The rationale of this tax program is that if it creates a better outcome for both the IRS and the taxpayer than if not implemented then a tax compromise will be made.


Conditions for an Offer In Compromise


To receive an offer in compromise at least one of the following must apply to the taxpayer:


The amount that can be garnished from wages for income tax debts are the lower of:


Doubt as to Liability

Where the taxpayer demonstrates doubt that the tax liability assessed by the IRS is accurate.


Doubt as to Collectibility

Where the taxpayer shows that the tax debt would probably not be collected by the IRS.


Effective Tax Administration

Where thetaxpayer admits that they owe the amount on the IRS tax assessment and accepts the tax could have been collected but shows extraordinary reasons that would "create an economic hardship or would be unfair and inequitable."


Elderly or disabled people tend to use the offer in compromise program more often than other individuals.


How An Offer In Compromise Affects Outstanding Tax Liens & Tax Levies


An Offer in Compromise in no way influences or removes an outstanding tax lien. The lien will stay in place even following acceptance by the IRS of an offer in compromise and will do so until the full amount of the tax compromise is fully paid.


On the other hand an offer in compromise does stop a tax levy as a taxpayer's property is safe from an IRS levy when a valid offer in compromise is accepted by both taxpayer and the IRS. It is also stops a tax levy while pending and if rejected for 30 days after a rejection. If the taxpayer appeals the rejection, The IRS cannot levy while appeals against rejections are in progress.



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How to Get Back Tax Relief

You can get some relief from back taxes owed by negotiating a reduction in tax debts with the IRS or an agreement to extend the duration to pay off the tax.


What are Wage Garnishments?
Find out about wage garnishment and how they can be used by the IRS to recover tax debts.


Offer In Compromise
Taxpayers who satisfy certain criteria may receive an offer in compromise or tax reduction from the IRS on their tax liability.