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Offer In Compromise -
Frequently Asked Questions - Application Fee
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What is an offer in compromise user or
application fee? |
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How much is the application fee and when
does it begin? |
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Who will have to pay this application
fee? |
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What method of payment does the IRS
accept? |
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Can I send cash as payment for the
application fee? |
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Can I send one check to cover both the
application fee and OIC amount? |
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Can a tax practitioner who represents a
number of clients and files multiple OICs combine several
application fees into one check? |
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What happens if I submit an application
fee and find that I have insufficient funds in my account
to cover the check? |
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Will payment of the application fee
reduce the OIC amount? |
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Will the application fee create an
additional financial hardship on taxpayers who are already
having payment problems? |
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What does the IRS review when I submit
my "Offer in Compromise," Form 656? |
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What happens to my fee if the OIC is
considered not process-able? |
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Why does the IRS require the May 2001
version of Form 656, "Offer in Compromise," package?
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How do I know if I qualify for the
poverty guideline exception? |
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What do I need to do if the Form 656-A
Worksheet shows that I qualify for the poverty guideline
exception? |
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What happens if I submit the Form 656-A
and the IRS later says I made an error and do not qualify
for the poverty guideline exception? |
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Does the poverty guideline exception
apply to businesses? |
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What happens if I do not submit the OIC
application fee with the OIC Form 656? |
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How is the application fee collected?
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How many Forms 656 must I complete if my
spouse and I are submitting one offer to compromise the
same joint liability? How many application fees must be
attached? |
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How many Forms 656 should be filed when
the taxpayers are divorced, separated, or/married, but
living apart? How many fees must be attached in these
situations? |
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When a married couple owes a joint
liability and one spouse also owes an individual
(non-joint) liability, how many Forms 656 are required?
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How many Forms 656 are required from a
married couple who owe joint income tax, plus the husband
owes an individual year before he was married and a
business liability, and the wife owes an individual year
with her prior spouse? How many application fees will be
required? |
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How many Forms 656 are required if you
have an individual who owes tax and who also owes a
partnership debt as a general partner or corporate debt
from a closely held corporation? How much would the
application fee be? |
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What will happen if the IRS accepts an
OIC for processing, along with the $150 application fee,
but then requests additional Forms 656 be submitted with
additional $150 fees, and the taxpayer fails to respond?
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What happens to the Form 656 and
application fee after I send it to the IRS? |
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Are there any instances when the
application fee will be applied against the amount of the
offer or refunded to me after the OIC has been accepted
for processing? |
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What if my OIC is not accepted, will the
application fee be refunded to me? |
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Where can I find more information on OIC
and the application fee? |
Offer in Compromise -
Frequently Asked Questions - Processing Your OIC
Offer in Compromise -
Frequently Asked Questions - Offer Determinations
General
What is an Offer in
Compromise?
An offer in compromise (OIC) is an agreement between a
taxpayer and the Internal Revenue Service (IRS) that
resolves the taxpayer's tax liability. The IRS has the
authority to settle, or compromise, federal tax liabilities
by accepting less than full payment under certain
circumstances. The IRS may legally compromise for one of the
following reasons:
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Doubt as to Liability: Doubt exists that the
assessed tax is correct.
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Doubt as to Collectibility: Doubt exists that the
taxpayer could ever pay the full amount of tax owed. The
minimum offer amount must generally be equal to (or
greater than) the taxpayer's reasonable collection
potential (RCP). The RCP is defined as the total of the
taxpayer's realizable value in real and personal assets,
plus his/her future income.
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Note: Unless the taxpayer files an OIC claiming
special circumstances, the offered amount must equal or
exceed the reasonable collection potential. Realizable
value is the asset's quick sale value (amount which could
be reasonably expected through the sale of the asset)
minus what the taxpayer owes to a secured creditor.
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Effective Tax Administration: There
is no doubt that the tax is correct and no doubt that the
amount owed could be collected in full, but exceptional
circumstances exist such that collection of the full
amount would create economic hardship or where compelling
public policy or equity considerations provide sufficient
basis for compromise. The taxpayer bears the burden of
proof to show their OIC qualifies for public policy or
equity considerations. They must show that their
circumstances are compelling enough to justify acceptance
of their OIC compared to other taxpayers in similar
circumstances.
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What are the requirements for an OIC?
In order to be considered for an OIC, a taxpayer must meet
all of the following requirements:
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Used the most current versions of Form 656, "Offer in
Compromise," and Forms 433-A and 433-B, "Collection
Information Statements" . The most current versions are
dated May 2001; |
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Submitted the $150 application fee, or Form 656-A,
"Income Certification for Offer in Compromise Application
Fee," with the Form 656; |
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Filed all required federal tax returns;
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Filed and paid any required employment tax returns on
time for the two quarters prior to filing the OIC, and is
current with deposits for the quarter in which the offer
in compromise was submitted; and |
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Is not a debtor in a bankruptcy case.
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Taxpayers must comply with all federal tax filing and
paying requirements for a period of five years following
acceptance of their OIC, or until the OIC is paid in full,
whichever is longer. This also includes making required
estimated tax payments and federal tax deposits.
How do I
complete an OIC?
First obtain a Form 656,
Offer in Compromise package (Version 5/2001). The package
includes information and instructions for completing the
form, as well as a worksheet that can be used to calculate
an amount to offer. Form 433-A, Collection Information
Statement for Wage Earners and Self-Employed Individuals,
and Form 433-B, Collection Information Statement for
Businesses (Version 5/2001), are included in the Form 656
package and may need to be completed as well depending upon
each individual situation. Taxpayers will need to review and
include amounts for items such as housing and utilities from
the Collection Financial Standards, and
Necessary Expenses, to complete their collection
information statement(s).
NOTE: For corporations and partnerships,
Form 433-A may be requested from corporate officers and
individual partners.
When does a Form 433, Collection Information Statement, need
to be completed?
Collection Information Statement(s) are required for doubt
as to collectibility and effective tax administration OICs,
and doubt as to liability involving Trust Fund Recovery
Penalty assessments.
Are the
forms available on-line?
Yes. The forms needed to complete an OIC are available on-line.
Also, forms may be obtained by calling 1-800-829-3676 or by
visiting a local IRS office. Or you can call us
(714-850-1680) and we can email them over to you.
What forms are submitted to request an effective tax
administration OIC?
To receive consideration on this basis, a taxpayer
must submit:
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The May 2001 version of Form 656, "Offer in
Compromise" |
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The May 2001 version of the "Collection Information
Statement" (Form 433-A and/or Form 433-B) |
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A detailed written narrative must be documented on
Form 656, Item 9. The narrative must explain the
exceptional circumstances and why payment of the tax
liability in full would either create an economic hardship
or demonstrate why there is compelling public policy or
equity considerations sufficient to support an acceptance
recommendation. The taxpayer bears the burden of proof to
show their OIC qualifies for public policy or equity
considerations. They must show that their circumstances
are compelling enough to justify acceptance of their OIC
compared to other taxpayers in similar circumstances. |
If a taxpayer requests consideration on the basis of
effective tax administration, the IRS must first establish
that no doubt as to liability and no doubt as to
collectibility conditions exist. Hence, an OIC filed under
effective tax administration can only be considered once the
IRS determines that the tax liability is correct and
collectible in full.
Once the IRS begins the process of processing the OIC under
the effective tax administration guidelines, it will
consider such issues as the taxpayer's overall history of
filing and paying taxes, as well as the overall impact on
voluntary compliance.
I qualify for an installment agreement, can I still submit
an OIC?
If a tax liability can be paid in a lump sum or
through an installment agreement, taxpayers will not be
considered for an OIC. If an OIC is received, it will be
rejected with appeal rights. The only exception is if a
taxpayer requests an OIC under the effective tax
administration provision.
The IRS recently levied my bank account. Will the levy
proceeds be returned if I file an offer in compromise?
The IRS will keep all payments and credits made,
received or applied to the total original tax liability
before the OIC was submitted. The IRS may also keep any
proceeds from a levy that was served prior to the submission
of an OIC, but which were not received at the time the OIC
was submitted. Refer to OIC Contractual Terms, Item (f).
Can I stop sending payments as part of my approved
installment agreement once I file an offer in compromise?
No. Installment agreement payments must be
continued while the OIC is being considered. Installment
agreement payments will not be applied against the amount
you offered. Refer to OIC Contractual Terms, Item (f).
Can taxes be settled by offering pennies on the dollar?
OICs must include an amount equal to or greater
than the total value of all assets, plus future income. That
total is generally the reasonable collection potential
amount, and not simply an offer of ten cents on the dollar,
or a percentage of the debt. A
consumer alert has been issued advising taxpayers to
beware of promoters' claims that tax debts can be settled
for "pennies on the dollar." The IRS cautions that the OIC
program is not designated to be a program for everyone with
financial problems, and it should not be viewed as an
invitation to avoid paying taxes.
Can I file an offer in compromise to delay collection
action?
Once it is determined an OIC was filed solely to
hinder and/or delay collection actions, the IRS will return
the OIC without any further consideration. Taxpayers will
not be afforded the right to appeal this decision.
Application Fee
What is an offer in compromise user or application fee?
Federal agencies are authorized to establish
charges for services provided by the agency, called "user
fees." The U.S. Office of Management and Budget
encourages agencies to implement these fees to recover the
cost of providing special services to some recipients that
others do not use. Accordingly, the IRS has established a
user fee that will recover part of the cost of processing
and reviewing offer in compromise requests. The IRS has
chosen to call it an "application fee" because the fee is
required when an OIC application is submitted for
consideration.
How much is the application fee and when does it begin?
The application fee for submitting an OIC is $150
and will be required on all offers that are postmarked
November 1, 2003, and thereafter.
Who will
have to pay this application fee?
All taxpayers who submit a Form 656, "Offer in
Compromise," postmarked November 1, 2003, and thereafter,
must pay the $150 fee, except in two instances:
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The OIC is submitted based solely on "doubt as to
liability;" or |
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The taxpayer's total monthly income falls at or below
income levels based on the Department of Health and Human
Services (DHSS) poverty guidelines. |
What method of payment does the IRS accept?
A check or money order made payable to the United States
Treasury.
Can I send cash as payment for the application
fee?
No. Taxpayers must send a check or money order for $150 made
payable to the United States Treasury.
Can I send one check to cover both the
application fee and
OIC amount?
No. Taxpayers must initially pay the application fee.
After the IRS accepts the offer, the IRS will notify the
taxpayer to promptly pay any unpaid amounts that become
due under the terms of the offer agreement.
Can a tax practitioner who represents a number
of clients and files multiple OICs combine several
application fees into one check?
No. Checks that combine application fees for
several offers will not be accepted, and the offers will
be returned. Each Form 656 must have a separate check
attached.
What happens if I submit an application fee and
find that I have insufficient funds in my account to cover
the check?
If we receive notification of insufficient funds, the IRS
will immediately stop processing the Form 656 and the OIC
will be returned to the taxpayer without any further
consideration.
Will payment of the application fee reduce the
OIC amount?
The application fee is in addition to the amount listed on
Form 656, Item 7. However, when the IRS determines the
acceptable amount of an OIC based on doubt as to
collectibility, it considers the value of all of the
taxpayer's assets. Because some of the taxpayer's assets
were used to pay the OIC application fee, payment of the
fee will reduce the acceptable amount of the OIC. The
taxpayer therefore pays no more for an OIC with the fee
than the taxpayer would have paid without the fee.
Will the application fee create an additional
financial hardship on taxpayers who are already having
payment problems?
Because payment of the fee reduces the acceptable OIC
amount, most taxpayers will not experience any additional
financial hardship as a result of the fee. However, for
some taxpayers the $150 fee may exceed their ability to
pay. The IRS believes that the exception to the fee for
taxpayers whose income is at or below poverty will protect
such taxpayers. The IRS intends to monitor this issue and
adjust the amount of the exception if it appears there are
a number of taxpayers who cannot pay even the amount of
the fee for an OIC.
What does the IRS review when I submit my OIC,
Form 656?
The IRS first reviews an OIC to see if it is "processable."
Processable is the term the IRS applies to those OICs that
have met certain criteria. An OIC is processable if the
taxpayer:
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Used the most current versions of Form 656, "Offer in
Compromise" and Forms 433-A and 433-B, "Collection
Information Statements." The most current versions are
dated May 2001; |
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Submitted the $150 application fee, or Form 656-A,
"Income Certification for Offer in Compromise Application
Fee," with the Form 656; |
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Filed all required federal tax returns;
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Filed and paid any required employment tax returns on
time for the two quarters prior to filing the OIC, and is
current with deposits for the quarter in which the offer
in compromise was submitted; and |
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Is not a debtor in a bankruptcy case.
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What happens to my fee if the OIC is not
considered process able?
The application fee will be returned to the taxpayer if the
OIC is determined not to be processable.
Why does the IRS require the May 2001 version of
Form 656, "Offer in Compromise" package?
The May 2001 version of Form 656 was redesigned to be a
complete package, containing the offer in compromise,
instructions, Forms 433-A and 433-B, as well as a worksheet
that helps to calculate the offer amount. It prompts
taxpayers to attach necessary financial documents needed in
the processing of the offer.
How do I know if I qualify for the poverty
guideline exception?
The IRS has developed Form 656-A, "Offer in Compromise
Application Fee Instructions and Certification," to help
taxpayers determine whether they qualify for the poverty
guideline exception. Taxpayers must complete the "Offer in
Compromise Application Fee Worksheet," found in
Form 656-A (fill-in format) to see if they qualify.
What do I need to do if the Form 656-A Worksheet
shows that I qualify for the poverty guideline exception?
Taxpayers must sign and date Form 656-A (fill-in format) "Income Certification for
Offer in Compromise Application Fee." If a taxpayer is
submitting a joint OIC with a spouse, the spouse must also
sign the certification. The Income Certification must be
attached to Form 656 in lieu of sending the $150 application
fee. The Income Certification must be attached to Form
656. It is recommended that the Application Fee Worksheet
also be submitted.
What happens if I submit the Form 656-A and the
IRS later says I made an error and do not qualify for the
poverty guideline exception?
The IRS will return the OIC to the taxpayer without any
further processing.
Does the poverty guideline exception apply to
businesses?
No. The exception for taxpayers with total monthly incomes
falling at or below income levels based on DHSS poverty
guidelines only applies to individuals. It does not apply to
other entities, such as corporations or partnerships.
What happens if I do not submit the OIC
application fee with the OIC Form 656?
Unless the taxpayer has submitted an OIC under the doubt as
to liability provision, or attached Form 656-A, showing a
poverty guideline certification, the IRS will return the
Form 656 as not processable.
How is the application fee collected?
The application fee is collected when a taxpayer submits a
Form 656. The general rule is that the IRS needs as many
Forms 656 as there are entities seeking to compromise. A
check or money order in the amount of $150 must be attached
to each OIC.
[Note: This assumes that the taxpayer does not meet one
of the exceptions for paying the application fee: 1) OIC
filed solely under doubt as to liability, or 2) total
monthly income falls at or below income levels based on the
DHSS poverty guideline levels.]
How many Forms 656 must I complete if my spouse
and I are submitting one offer to compromise the same joint
liability? How many application fees must be attached?
A married couple owing the same joint income tax
liability may file only one Form 656 listing the joint
liability. One fee of $150 should be attached to Form 656. A
married couple opting to file separate offers to compromise
the same joint liability may do so, but two $150 fees will
be required.
[Note: This assumes that the taxpayers do not meet one of
the exceptions for paying the application fee: 1) OIC filed
solely under doubt as to liability, or 2) total monthly
income falls at or below income levels based on the DHSS
poverty guideline levels.]
How many Forms 656 should be filed when the
taxpayers are divorced, separated, or/married, but living
apart? How many fees must be attached in these situations?
A divorced, separated, or married couple
living apart may still file one Form 656 listing their joint
liability and pay only one $150 fee, as long as all the
taxes owed are joint liabilities. Taxpayers in these
situations that opt to file separate offers must pay a $150
application fee for each offer that is submitted for
consideration.
[Note: This assumes that the taxpayers do
not meet one of the exceptions for paying the application
fee: 1) OIC filed solely under doubt as to liability, or 2)
total monthly income falls at or below income levels based
on the DHSS poverty guideline levels.]
When a married couple owes a joint liability and
one spouse also owes an individual (non-joint) liability,
how many Forms 656 are required?
Two OICs are needed. One for the joint liability and
another one for the individual (non-joint) liability. A
check or money order for $150 should accompany each Form
656.
[Note: This assumes that the taxpayers do not meet one of
the exceptions for paying the application fee: 1) OIC filed
solely under doubt as to liability, or 2) total monthly
income falls at or below income levels based on the DHSS
poverty guideline levels.]
How many Forms 656 are required from a married
couple who owe joint income tax, plus the husband owes an
individual year before he was married and a business
liability, and the wife owes an individual year with her
prior spouse? How many application fees will be required?
In keeping with the “one fee per entity”
rule:
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The husband should file one offer listing the joint
income tax, the individual year he owes before the
marriage and his business liability, and attach a $150
application fee to the offer.
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The wife should file an offer listing the joint income
tax and the individual year that she owes with her prior
spouse, and attach a $150 application fee to the offer.
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It does not matter that the joint liability
will appear on both offers.
[Note: This assumes that the taxpayers do
not meet one of the exceptions for paying the application
fee: 1) OIC filed solely under doubt as to liability, or 2)
total monthly income falls at or below income levels based
on the DHSS poverty guideline levels.]
How many Forms 656 are required if you have an
individual who owes tax and who also owes a partnership debt
as a general partner or corporate debt from a closely held
corporation? How much would the application fee be?
In this situation, two Forms 656 will be required. One
for the individual liability, and the other for the
partnership or corporate liability. A check or money order
for $150 must be attached to each offer, for a total of
$300. The IRS cannot combine individual tax on an offer
application with taxes owed by a partnership or
corporation.
[Note: This assumes that the taxpayers do not meet one of
the exceptions for paying the application fee: 1) OIC filed
solely under doubt as to liability, or 2) total monthly
income falls at or below income levels based on the DHSS
poverty guideline levels.]
What will happen if the IRS accepts an OIC for
processing, along with the $150 application fee, but then
requests additional Forms 656 be submitted with additional
$150 fees, and the taxpayer fails to respond?
Taxpayers are required to submit one fee for
each Form 656 taken in for processing. Failure to submit
additional Form 656 with the corresponding $150 application
fee when requested, will cause the IRS to return the offer
without any further consideration. The $150 application
fee will be retained.
What happens to the Form 656 and application fee
after I send it to the IRS?
The $150 is retained until the IRS determines whether the
Form 656 is processable.
Are there any instances when the application fee
will be applied against the amount of the offer or refunded
to me after the OIC has been accepted for processing?
Yes. The fee will be applied against the amount of the offer
or, if the taxpayer requests, returned to the taxpayer if:
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If the IRS accepts an OIC based on
effective tax administration (ETA).
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If the IRS accepts an OIC based on a determination of
doubt as to collectibility with special circumstances.
What if my OIC is not accepted, will the
application fee be refunded to me?
No. The IRS will retain the fee when:
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The taxpayer's initial OIC amount is too low - based
on the IRS evaluation of the taxpayer's financial
condition - and the taxpayer is given the opportunity to
increase it. If the taxpayer does not increase the OIC
amount, or show special circumstances, the IRS will reject
the Form 656;
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The taxpayer fails to submit additional financial
documents to assist in the IRS review. If the taxpayer
fails to respond, and/or submit the requested information,
the OIC will be returned without further consideration; or
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The taxpayer chooses to withdraw the Form 656.
Where can I find more information on OIC and the
application fee?
For additional information, call 1-800-829-1040, or
visit the offer in compromise area on the IRS Web site.
Processing Your OIC
What happens if an OIC is submitted using the
wrong forms?
The Form 656 and/or Forms 433 "Collection
Information Statements" are necessary to conduct an offer
investigation. Failure to submit these documents will cause
considerable delay in the process. Taxpayers wanting to
pursue the OIC as a way to satisfy their tax liability will
have to submit the forms in order to have the OIC
reconsidered.
Will the submission of inaccurate Form 656 and
Forms 433-A/B affect the timely disposition of my case?
Yes. The IRS' procedures require that a taxpayer be
contacted in writing and provided a one-time opportunity to
correct the error(s), and/or update the financial statement.
Failure to correct the error(s) and/or respond results in
the OIC being returned to the taxpayer without any further
actions on the part of the IRS.
What are the common errors when preparing an
offer in compromise?
The following are key items that require the IRS to
request corrections and delay the processing of OICs:
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Incorrect address (don't use P.O. Box, must use street
address), Form 656, Item 1.
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Taxpayer identification numbers missing or incorrect on
Form 656, Item 2.
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EIN not included for an offer on a sole proprietor
liability, From 656, Item 3.
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Tax liability periods/years missing on Form 656, Item 5.
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Tax periods included where no tax is due, Form 656, Item
5.
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Reason for compromise not checked, Form 656, Item 6.
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No "offer to pay" amount or an inappropriate amount
shown on Form 656, Item 7.
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OIC includes joint liabilities without signatures of
both parties, Form 656, Item 11.
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OIC includes single liabilities, but has signatures of
two parties.
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OIC submitted by single taxpayer, but includes joint
liabilities.
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What happens if I miscalculate my OIC or do not
offer an amount equal to my reasonable collection
potential?
This will result in processing delays and could
be grounds for the IRS ultimate decision to reject an OIC.
The IRS is observing a large upsurge of receipts in which
the offered amount is clearly much lower than the
reasonable collection potential illustrated on the
taxpayer's financial statement. Furthermore, in a large
number of these cases, the financial statement also shows
that the taxpayer has a clear ability to satisfy the
liability in full, or via an installment agreement during
the course of the collection statute, and the taxpayer
cites no special circumstances.
The IRS reviews OICs for indications of fraudulent intent.
Submitting an OIC with false information, or making a
false statement to an IRS employee, is considered an
indicator of fraud and may be subject to civil or criminal
penalties.
What are the National and Local Standards and
how are they considered in evaluating an OIC?
Collection Financial Standards are used to help
determine a taxpayer's ability to pay a delinquent tax
liability.
Allowances for food, clothing and other items, known as
the National Standards, apply nationwide, except for
Alaska and Hawaii, which have their own tables. Taxpayers
are allowed the total National Standards amount for their
family size and income level, without questioning amounts
actually spent.
Maximum allowances for housing and utilities and
transportation, known as the Local Standards, vary by
location. Unlike the National Standards, the taxpayer is
allowed the lesser of the amount actually spent or the
standard.
OIC Determinations
What happens if the IRS accepts an OIC?
If an OIC is accepted, the following will apply:
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The taxpayer must pay the OIC amount as quickly as
possible in accordance with the acceptance agreement.
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The IRS will keep any tax refund, including interest
due, as the result of an overpayment of any tax or
other liability for the tax period extending through
the calendar year the IRS accepts the OIC. A taxpayer
may not designate a refund and/or overpayment to be
applied to estimated tax payments for the following
year. This condition does not apply if the OIC is
based on Doubt as to Liability only.
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The taxpayer will waive their right to contest in
court or otherwise, the amount of the tax liability.
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If a Notice of Federal Tax Lien has been filed against
a taxpayer, the IRS will release it when the payment
terms of the OIC are satisfied.
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The taxpayer must remain in compliance with filing and
payment of all tax returns for a period of five years from
the date the OIC is accepted or until the OIC is paid in
full, whichever is longer. Failure to pay the OIC on time,
and/or to remain in compliance during the five-year period
or until the OIC is paid in full, whichever is longer,
will result in the OIC being declared in default..
What happens if the IRS does not accept an OIC?
Once the IRS determines it cannot accept an
offer, the taxpayer will be advised of the reasons behind
the decision. The taxpayer will be afforded another
opportunity to submit any other information that might
cause the IRS to reconsider it preliminary decision to
reject the offer. The exception to this is when the
taxpayer has an ability to satisfy the liability in full
and has not pointed to special circumstances.
How much interest am I going to pay if my OIC
is accepted?
Interest will not accrue on the
taxpayer's accepted OIC amount from the date of acceptance
until the OIC is paid. Interest and penalties will
continue to accrue on the unpaid tax liability while the
OIC is under consideration.
Will I be entitled to receive tax refunds if my
OIC is accepted?
As additional consideration beyond the amount of
the taxpayer's offer, the IRS will keep any refund,
including interest due, because of an overpayment of any
tax or other liability, for tax periods extending through
the calendar year the IRS accepts an OIC. Refer to
OIC Contractual Terms, Item (g).
Can I designate any payments once my OIC is
accepted?
No. Refunds and overpayments may not be
designated as estimated tax payments for the following
year. This condition does not apply if the OIC was
accepted under doubt as to liability only. Refer to
OIC Contractual Terms , Item (g).
Is a tax lien released when an OIC is accepted?
The IRS releases a Notice of Federal Tax Lien when all of
the OIC payment terms are satisfied. For an immediate
release of a lien, a taxpayer can submit payment using a
certified check and include a request letter.
What happens if I do not meet all the terms of
my accepted OIC?
The IRS may default the OIC and reinstate the
entire tax liability, less all payments and credits
received.
What happens if I default my OIC?
The IRS may take the following actions:
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Immediately file suit to collect the entire unpaid
balance of the OIC
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Immediately file suit to collect an amount equal to
the original amount of the tax liability as
liquidating damages, minus any payment already
received under the terms of this OIC
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Disregard the amount of the OIC and apply all payments
made under the OIC against the original amount of the
tax liability
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File a Notice of Federal Tax Lien on any tax periods
not previously covered by a lien
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File suit or levy to collect the original amount of
the tax liability
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NOTE: The IRS will not default an
agreement when taxpayers have filed a joint OIC with your
spouse or ex-spouse, as long as you have kept, or are
keeping, all the terms of the agreement, even if your
spouse or ex-spouse violates the future compliance
provision.
What happens if I do not file my tax return or
pay my taxes next year?
The OIC will be defaulted. An OIC requires future
compliance for a period of five (5) years from the date of
acceptance of the OIC, or until the offered amount is paid
in full, whichever is longer. Compliance is the timely
filing and paying of all required returns and taxes.
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