In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). For the IRS to accept an offer, you must file all tax returns due and be up to date with the estimated tax payments or withholding. If you're a business owner and have employees, you must file all returns and be current with all your federal tax deposits. A transaction offer (OIC) is when the IRS accepts an amount less than the full amount the taxpayer owes.
You can pay a lump sum for five months OR make monthly payments over a 24-month period. Tax professionals with experience in resolving tax debts remain your best option for making an informed decision on how to calculate your reasonable collection potential and create an offer that the IRS is likely to accept the first time, since they can estimate what their successful offer should be based on. Estimates that have provided in the past. However, if your situation is complicated, you are self-employed, or have any of the special circumstances described in this publication, you should seek professional advice.
In general, people with temporary situations and even underemployed are not good candidates for the OCI, since the IRS can use their expected income level when employed full time to calculate how much they can afford (if the possibility of employment is obvious). The IRS also takes a close look at whether a substantial amount was withdrawn from your retirement accounts before filing your OCI. When calculating the offer is complicated, it is with the income and expenditure table (EIT), and there can be quite large discrepancies between what the taxpayer reports and what the IRS reports. LITCs represent people whose income is below a certain level and who need to resolve tax issues with the IRS.
That said, doing the numbers this way still doesn't guarantee that the IRS will accept your offer. This tax settlement date is the first day of your tax debt to the government, a debt that matures after ten years (plus applicable toll periods). The reason you need to credit accounts with a zero balance is because when the ICO unit receives one of these offers, it will consult your name in Accurint to see what your assets are and then analyze your credit report. If you offer to pay a lump sum, your down payment should be 20 percent of the total offer amount.
It can be a useful tool to see if a commitment offer is a better option than a regular monthly payment plan and by how much. If you receive a good package in the mail that is well organized and the numbers are very clear, the offer is more likely to be accepted on the spot rather than having to go through analysis. It also relaxed the eligibility requirements for paying back taxes in an installment plan and provided more favorable OCI requirements. With your salary (or bank account) on hold while your offer is pending, the IRS can still file a Federal Tax Lien Notice to protect your lien on any property you own and notify other creditors of that interest.
If your car has an open loan or your house has a mortgage, the IRS will subtract those amounts and get a net amount of principal.