Tax debt can create serious financial stress, especially if you’re unable to make full payments. For Ohio residents facing significant tax debt, the Internal Revenue Service offers a potential solution: the Offer in Compromise (OIC) program.
This arrangement allows taxpayers to settle their debt for less than the total amount they owe. Although not everyone qualifies, exploring this option can be worthwhile if you’re struggling to manage a large tax burden.
How does an offer in compromise work?
An OIC functions as a negotiated agreement between you and the IRS. If the IRS approves your offer, you can settle your tax debt by paying a reduced amount.
To apply, you must submit a detailed application that includes financial documentation outlining your income, assets, and monthly expenses. The application requires a non-refundable fee, although individuals who meet certain low-income guidelines may qualify for a fee waiver. If you get approved, you can choose between paying the agreed-upon amount in a lump sum or spreading payments over time, depending on the terms of the agreement.
Who qualifies for an offer in compromise?
The IRS primarily bases qualification for an OIC on your ability to pay. If you cannot pay the full amount of your tax debt or doing so would cause severe financial hardship, you may qualify. You must also file all required tax returns and avoid bankruptcy proceedings.
The IRS evaluates your income, expenses, assets, and overall financial situation to determine whether to approve your offer. They will only accept if they believe the reduced payment represents the most they can realistically collect from you. To help you determine whether you should apply, the IRS provides an online tool that you can use to assess your eligibility.
While no one has guaranteed guaranteed approval, an Offer in Compromise provides an opportunity to reduce your overall tax liability. If the IRS accepts your application, it can significantly lighten your financial burden and help you regain control of your tax debt.
