Who is eligible?
- A taxpayer that cannot make a full payment or monthly installment payments may contact the IRS to propose an OIC.
- A taxpayer that has filed for bankruptcy is not eligible.
What proposals are accepted?
The IRS may accept OIC proposals if there is a doubt as to the amount of taxpayer liability, doubt to as to whether the debt can be fully collectible, and when the full collection of the debt would create an unfair or inequitable economic hardship on the taxpayer.
- Taxpayer may make an OIC for a lump sum payment or a periodic payment. The taxpayer must include with their proposals the application fee, and 20% of his lump sum payment, or the first installment of his periodic payment plan.
- Intention to file for bankruptcy is an acceptable negotiating tactic, and will result in the reduction in the amount of the IRS will accept during negotiations.
- Negotiating an OIC and appealing the outcome will delay collection, and is an effective tactic for running the three-year mechanical time frame for bankruptcy. AN OIC should always be sought as late in the collection process as possible but before a CDP notice is issued.