Offer in Compromise

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Definition of 'Offer in Compromise'

An offer in compromise (OIC) is a settlement between a taxpayer and the Internal Revenue Service (IRS) for an amount that is less than the full amount owed. The IRS may accept an OIC if it believes that the amount offered is the most that can reasonably be collected.

There are several factors that the IRS will consider when evaluating an OIC, including:

* The taxpayer's ability to pay.
* The taxpayer's financial situation.
* The taxpayer's history of compliance with the tax laws.
* The taxpayer's willingness to cooperate with the IRS.

If the IRS accepts an OIC, the taxpayer will be required to sign a Form 656, Offer in Compromise. The Form 656 includes information about the taxpayer's financial situation and the amount of the proposed settlement.

The IRS will typically take several months to review an OIC. If the IRS accepts the OIC, the taxpayer will be required to pay the agreed-upon amount in full. If the IRS rejects the OIC, the taxpayer will be required to pay the full amount of tax owed.

There are several advantages to filing an OIC. First, it can save the taxpayer a significant amount of money. Second, it can help the taxpayer avoid the possibility of being audited or having their wages garnished. Third, it can help the taxpayer resolve their tax debt and move on with their life.

However, there are also some disadvantages to filing an OIC. First, the IRS may reject the OIC. Second, the OIC process can be time-consuming and complex. Third, the taxpayer may be required to disclose personal financial information to the IRS.

If you are considering filing an OIC, it is important to speak to a qualified tax professional. A tax professional can help you determine if an OIC is right for you and can assist you with the OIC process.

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