An Offer in Compromise (OIC) is a settlement offer submitted by a taxpayer to the IRS. The taxpayer can propose a monthly repayment plan lasting multiple years or a short repayment plan. Accepting the offer is at the discretion of the IRS.
In order for the agency to make a decision on an OIC, they will want full knowledge of the taxpayer’s financial health, including income and assets. Naturally, the IRS has a form for disclosing the taxpayer’s finances. It is called form 433-A
The form walks through all common components of wealth, income, and expense in seven sections, outlined below:
- Personal Information
- Employment Information for Wage Earners
- Other Financial Information
- Personal Asset Information for All Individuals
- Monthly Income and Expenses
- Business Information
- Sole Proprietorship Information
The supplied information will need to be supported through account statements, pay receipts, and similar information. Submitting false or misleading information on this form carries the penalties of perjury.
In the OIC process, the taxpayer and the IRS are not on an equal power basis. In addition to the statuary advantages that the IRS has, there is the simple matter of experience. For the IRS, this is a routine matter. For the taxpayer, this is hopefully a once in a lifetime experience. In this setting, it is the taxpayer that is making an offer.
A good offer is one that the IRS will accept and which the taxpayer can realistically meet. Creating a good offer takes an understanding of how the IRS is likely to view the information on the 433-A. If you are considering professional assistance in developing an OIC, please contact us.