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What Is an Offer in Compromise in Texas?

Feb 6, 2024

Dealing with back taxes and IRS issues can be daunting, but you’re not alone. At JD Tax Law, we’re dedicated to assisting you in exploring your options, including the possibility of an Offer in Compromise (OIC). This program, endorsed by the IRS, allows taxpayers to resolve their tax debts for less than the total amount owed. It’s precious for those facing significant financial hardship, making full payment unfeasible.

Providing complete and accurate financial information to the IRS is crucial when applying for an OIC. Any omission or dishonesty can result in rejection and complicate your tax situation. Approach the OIC process with transparency and integrity to improve your chances of approval.

Eligibility for an Offer in Compromise

Eligibility for an OIC hinges on a detailed IRS analysis of your financial situation, encompassing income, expenses, and asset equity. The IRS rigorously evaluates these elements to ensure the program is reserved for those truly in need. Key areas of focus include:

  • Ability to Pay: The IRS assesses your income versus allowable living expenses, determining if surplus income is available for tax settlement. Additionally, asset equity is reviewed to see if it can contribute to settling the debt.
  • Income Evaluation: Both current and past income are examined to understand your capacity to pay off the tax debt, with consideration for potential future financial improvements.
  • Expense Analysis: The IRS scrutinizes allowable living expenses, such as housing and food, to determine if you are living within your means and if expenses can be reduced to allocate funds for tax repayment.
  • Asset Equity: The IRS evaluates the equity in your assets, like property and investments, to ascertain their potential contribution to debt resolution.

Going Through the Offer in Compromise Filing Process

Embarking on the journey to file an Offer in Compromise (OIC) with the IRS is a detailed and complex process. It demands meticulous attention to paperwork and full financial disclosure. Understanding each step of this process is crucial to increasing the chances of a favorable outcome. Here’s a breakdown of what the journey entails:

  1. Comprehensive Financial Assessment: Before initiating the OIC process, conducting a thorough review of your financial situation is essential. This includes analyzing your income, expenses, assets, and liabilities. The aim is to understand your ability to pay the tax debt.
  2. Gathering and Preparing Documentation: Filing an OIC requires compiling various financial documents. These include bank statements, pay stubs, property valuations, etc. Accurate and complete documentation is vital, as it forms the basis of your OIC proposal.
  3. Completing the Required IRS Forms: The OIC process involves filling out specific IRS forms, such as Form 656, “Offer in Compromise,” and Form 433-A (OIC) or 433-B (OIC), which provide detailed financial information. These forms must be completed accurately to reflect your financial situation correctly.
  4. Proposing a Payment Amount: You’ll need to present an amount you can afford to pay. This amount is based on your financial analysis and represents what the IRS considers your “reasonable collection potential.”
  5. Submitting the Offer: Once all forms and supporting documents are prepared, the complete package is submitted to the IRS. Along with the forms and documentation, you’ll also need to pay the application fee and the initial payment as outlined in your offer.
  6. IRS Review Process: After submission, the IRS reviews your offer. This review is thorough and can take several months. During this time, the IRS may request additional information or clarification.
  7. Decision and Response: Eventually, the IRS will make a decision. If your offer is accepted, you must comply with the terms of the agreement, which often includes staying current with all filing and payment obligations. If your offer is rejected, you can appeal the decision.
  8. Professional Guidance: Going through the OIC process can be challenging, so seeking professional guidance is beneficial. At JD Tax Law, our team has extensive experience guiding clients through the OIC filing process. We help ensure that every aspect of your application is thoroughly and accurately prepared, enhancing the likelihood of acceptance.

Advantages of Securing an Offer in Compromise

An accepted OIC brings significant relief, allowing you to settle your tax debt for a lesser amount and offering a much-needed fresh start. However, only some qualify, and the journey can be challenging. Our team at JD Tax Law is here to provide comprehensive support and information, helping you make well-informed decisions throughout the process.

Reach Out to JD Tax Law for Experienced Guidance

At JD Tax Law, we pride ourselves on delivering top-tier tax, accounting, and bookkeeping services with a focus on value and efficiency. We understand the stress of tax debt and are here to help you discover the best resolution. If you’re considering an Offer in Compromise in Texas, contact us at JD Tax Law at (844) 786-7477 or through our website to schedule a consultation. Let’s collaborate towards achieving your financial freedom.