How Long will an Offer In Compromise Take?

What is an Offer In Compromise?

An offer in compromise is a program offered by the IRS (and state tax agencies) that allows you to settle your tax debt for less than the full amount you owe. An Offer may be an excellent option if you can’t pay your full tax liability, or doing so creates a financial hardship. The IRS will consider your unique set of facts and circumstances, such as:

• Ability to pay;
• Income;
• Expenses; and
• Asset equity.

The IRS will generally approve an offer in compromise when the amount offered represents the most that can reasonably expect to collect within a reasonable period of time. It is always prudent to explore all other payment options before submitting an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.

Make Sure you are Eligible

The IRS will automatically disqualify any newly filed Offer in Compromise (OIC) application if you have not filed all required tax returns and have not made any required estimated payments for the current tax year. Any application fee included with the OIC will also be returned. Any initial payment required with the returned application will be applied to reduce your balance due. Also know, this policy does not apply to current year tax returns if there is a valid extension on file, however estimated payments are still required.

Lastly, you will not eligible if you are in an open bankruptcy proceeding. Use the Offer in Compromise Pre-Qualifier to confirm your eligibility and prepare a preliminary proposal.

Submit Your Offer

Submitting an Offer In Compromise to the IRS is rather lengthy and paperwork intense.  Your complete offer pacakge will income IRS form as follows:

• Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
• Form 656(s) – individual and business tax debt (Corporation/ LLC/ Partnership) must be submitted on separate Form 656;
• $205 application fee (non-refundable); and
• Initial payment (non-refundable) for each Form 656.

In addition to IRs forms, you will be required to provide all supporting documentation such as:

• Year to date proof of income such as paystubs
• 3 months bank statements, all pages, all accounts
• Copy of your car loan and proof of payment
• Copy of any court ordered payments and proof of payment (child support)
• Rental agreement or mortgage coupon
• Year to date Profit/Loss statement for self-employed

Just to name a few.  It is worth noting that the IRS may ask for many more items specific to your unique circumstances.

How Long will it Take to get an Offer In Compromise?

 First of all, patience will be a critical for you.  Officially, there are no set time tables at the IRS for evaluating a Offer In Compromise.  Additionally, there is no expiration date on the offer. 

Keep in mind that thousands of individuals and small businesses around the country are applying for an Offer in Compromise and there are many more applicants than representatives at the IRS to review all of them. 

In most instances, your offer package will be reviewed in the order it was received by the IRS.  In 2019 this was approximately 6 months, meaning if you submitted your offer in March, they were initially reviewing your offer package in September.

Remember, one of the criteria for being offer-eligible is to be current with your estimated payments in the current tax year.  Therefore, while you are waiting to hear back from the IRS you must continue to make estimated tax payments.

But wait, there’s more…

Once the IRS has reviewed your offer, you can expect them to ask for updated information to verify that your circumstances haven’t changed since you originally applied.  You can expect the IRS Revenue Officer to ask for:

• Updated paystubs
• Updated bank statements (3 months or more, all pages)
• Statements for other assets such as retirement accounts
• Mortgage or lease agreement and proof of payment
• Copy of Auto payments and proof of payment
• paperwork unique to your circumstances.

Once the IRS has received the updated paperwork that they requested it will be reviewed with a fine-tooth comb.  Specific questions may arise about activity on your bank statements and you’d better be prepared to give accurate answers.

After Your Offer Has Been Accepted

Congratulations!  Your offer has been accepted by the IRS! Not so fast, you are not finished just yet.  In most instances, you will be required to pay the full amount of the accepted offer within 5 months  (other types of offer allow for longer pay back periods).

Other conditions pertaining to your offer include:

• Forfeiture of next year’s income tax refund (if applicable).
• Maintain IRS compliance for the next 5 years into the future.

Failing to maintain compliance will revoke your offer and the IRS will once again seek to collect on the full balance due… with more penalties and interest added to the balance.

Conclusion

The Offer in Compromise program offered by the IRS is a great tool for settling tax debt for less than the full amount owed.  However, you can be sure that the process is long and paperwork intensive.  From start to finish the entire process may take up to a year.  In complicated payroll tax cases, it may even take longer.  Furthermore, consider an accepted offer like a golden ticket and maintain IRS compliance by filing and paying and tax debts on time for the next 5 years.

Tax Resolution in Las Vegas

Has the constant pressure from the IRS just taking its toll on you and your family?  Remember, you are one phone call away from getting your tax resolution case started.  Call today and speak to a tax expert at Patriot Tax Professionals.

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Your tax resolution case will be handled by trained professionals 100% of the time because every employee at Patriot Tax Professionals is licensed and admitted to practice before the IRS.  Our employees have a formal education in taxes and have passed all required examinations to practice before the IRS?  What other tax resolution firm can make that claim? 

When you call Patriot Tax Professionals, you will never speak to a “salesman” that really doesn’t know anything about tax resolution or the inner-workings of the IRS  and will tell you anything you want to hear just to get your business.   You will have the assurance of knowing that every single person that handles your case is licensed with years of professional tax experience working on tax cases similar to yours. 

Now who would you rather have work on your case, a licensed professional or a slick talking salesperson?