Taxpayers who would like to be considered for an Offer In Compromise should be very leery of television and radio ads, suggesting that you can settle your tax debt for pennies on the dollar. Likewise, if you contact a tax resolution company, you will more than likely be speaking to a salesman, who will tell you that you qualify for an OIC without having reviewed relevant documentation Contrary to popular belief, the Offer In Compromise Program is not a negotiation between the Taxpayer and the IRS, but rather a resolution process based upon objective criteria.

Eligibility for an OIC is based upon “collectability,” which involves a number of factors: First, the excess of your gross monthly income over allowable expenses (available income). It should be noted that some expenses may be limited to the national standards, which are predicated upon household size and geographic location; Second, gross assets less outstanding secured debt to arrive at net assets; and Third, a determination of the time period remaining under the Statute of Limitations for collections. The total monthly available income plus the total of net assets, represents the minimum amount of the offer. But the analysis does not end there. The minimum offer amount must be measured against the remaining period under the statute of limitations.

Generally, the IRS will not accept an OIC if you can pay your tax debt in full through an installment agreement or a lump sum over the remaining period under the collection statute. This third factor is often overlooked by tax practitioner and tax resolution companies. This is why you need a Tax Attorney.