If you owe the IRS money, you may be considering submitting an offer in compromise (OIC). An OIC is a proposal to settle your tax debt for less than the full amount owed. The IRS will consider your offer if you can show that you are unable to pay your full tax debt.
The success rate of OICs is 36.55%. This means that for every 100 OICs submitted, the IRS accepts 36 of them. There are a number of factors that can affect the success of an OIC, including the type of OIC, the amount of the proposed offer, and the taxpayer's financial situation.
The type of OIC:
There are two types of OICs: doubt as to collectability (DATC) and doubt as to liability (DTL).
An OIC-DATC is based on the taxpayer's inability to pay the full tax debt. An OIC-DTL is based on the taxpayer's contention that they do not owe the tax debt in the first place. The success rate of OIC-DATCs is higher than the success rate of OIC-DTLs.
The amount of the proposed offer: The IRS is more likely to accept an OIC if the proposed offer is a significant reduction from the full amount owed. For example, if you owe $10,000 in taxes, the IRS is more likely to accept an OIC for $5,000 than an OIC for $7,500.
The taxpayer's financial situation: The IRS will consider the taxpayer's financial situation when evaluating an OIC. The taxpayer's income, assets, and expenses will all be taken into account. If the taxpayer is unable to pay their full tax debt because of their financial situation, the IRS is more likely to accept an OIC.
The quality of the OIC submission: The IRS will also consider the quality of the OIC submission when evaluating an OIC. The OIC submission should include all of the required information and documentation. The OIC submission should also be well-written and easy to understand.
In addition to these factors, the success rate of OICs can also be affected by the current economic climate. During economic downturns, the IRS may be more willing to accept OICs because it is more difficult for taxpayers to pay their taxes.
Tips for Increasing Your Chances of Success:
If you are considering submitting an OIC, there are a number of things you can do to increase your chances of success. These tips include:
Work with a qualified tax professional: A qualified tax professional can help you assess your eligibility for an OIC and prepare a strong OIC submission.
Be realistic about your financial situation: The IRS will not accept an OIC that is not realistic. Be sure to factor in all of your income, assets, and expenses when determining the amount of your proposed offer.
Submit a complete and well-written OIC submission: The IRS will not consider an OIC that is incomplete or poorly written. Be sure to include all of the required information and documentation in your OIC submission.
Be patient: The OIC process can take several months or even years. Be patient and continue to communicate with the IRS throughout the process.
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