The Disadvantages of an IRS Offer in Compromise
Although the offer in compromise is a lifesaver for many citizens, here is what you need to know before you jump in:
The Offer Process Takes Time. It takes 4 to 6 months to assign your offer to an investigator. After the investigator is assigned, it takes 3 to 6 months to complete the investigation. Then, it can take another 12 months to get final acceptance. Upon final acceptance you are allowed up to 2 years to pay. However, you pay more to the IRS if you need more than 5 months to pay the accepted offer. If your offer is rejected and an appeal is filed, then tack on another 6 to 12 months.
Remember that every offer in compromise has a five-year probationary period attached to it. You have to stay current with every tax filing and payment obligation for five years following acceptance. If you fail to abide by these terms, the IRS will keep the money you paid, and you will end up back where you started—deep in tax debt.
The Offer Extends the Time to Collect: An offer in compromise adds at least another year to the time that the IRS has to collect from you. The ten-year statute of limitations is put on hold while your offer is being investigated. For example, if you submit an offer when there are only two years left to collect the tax, and the investigation takes one year, the IRS will still have two years to collect when the investigation is completed because the offer freezes the time to collect. So it may be wise for many taxpayers to take other measures to allow the time to collect to expire.
The Benefits of an Offer in Compromise
For many of my clients, the offer in compromise is a life changing program. And here’s why:
The Offer Brings Hope. When our law firm submits an offer, our clients know there is an excellent chance that the IRS will settle for less. This brings hope and peace of mind.
The Offer Brings Closure. If the offer is accepted, you pay the IRS, file your tax returns for five years, and it’s done. No more IRS in your hair, in your mailbox, and in your bank account. The painful loose end is closed. It’s nice to put it behind you.
The Offer Stops Collection. Once your lawyer submits the offer, the IRS suspends collection. See Internal Revenue Code 6331(k): no levy may be made during the period that the offer is pending, for an additional 30 days after the offer is rejected, and during the time any appeal of the rejection is pending. And if the offer is accepted, the IRS will leave you alone for good!
Streamlined Offer. If your total debt is $50,000 or less, you may qualify for a “streamlined” OIC, which is a quicker path to settlement and receives less scrutiny from IRS examiners.
Candidly, your opportunity for success is radically improved by hiring a local, licensed lawyer who deals with the IRS every day. Get an experienced, clever lawyer on your side who will aggressively represent your interests and is not intimidated by the IRS. Don’t hate yourself later because you relied on the wrong people.
I am obviously biased, but I believe Faith Firm is the best law firm individuals and businesses can hire to eliminate IRS and State tax debt.
You can contact us 24 hours a day, 7 days a week at 800 659 0525