A transaction offer (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer's tax liabilities for less than the total amount owed. Taxpayers who can pay their obligations in full through an installment agreement or other means generally won't qualify for an ICO in most cases. 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.
If you qualify for an OCI, the IRS will then determine how much it will accept from you to pay off the debt. The amount of this offer is also called reasonable collection potential (RCP). This is the amount the IRS can reasonably charge you before the collection law expires. A transaction offer is an agreement between a taxpayer and the IRS that settles a tax debt for less than the total amount owed.
A transaction offer is an option when a taxpayer cannot fully pay their tax liability. It is also an option when paying the full tax bill would cause financial difficulties for the taxpayer. The goal is to achieve a commitment that meets the best interests of both the taxpayer and the agency. 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.
A Form 656 with an application fee and an offer to pay if you are committing your individual tax liability or if two taxpayers owe only joint obligations. However, taxpayers who meet the low-income criteria should still be able to pay the amount of the offer during the agreed period if the IRS approves the OCI. Confirm that you meet the requirements and prepare a preliminary proposal with the Offer in Compromise prequalification tool. The right of retention will be released if your offer is accepted and the amount of the agreed offer has been paid in full.
The IRS will not accept your transaction offer unless the amount you offer is equal to or greater than the CPR. You will receive a letter that includes Form 656-PPV, Pledge Offer: Periodic Pay Voucher, which must be completed and attached to the payment. The refund that is withheld as part of the offer agreement applies to the total tax debt and is not considered a payment of the amount of the accepted offer. If your offer is returned, you can try to submit a new one, along with the application fee and the down payment.
For every dollar that appears on the list, the IRS will multiply it by 60 and that will be the minimum amount of the offer. You must obtain bank statements within the offer period (normally six months) that show a zero balance. Therefore, the designee cannot represent you in a collection matter, such as a transaction offer, before the IRS. When an offer is not met, the IRS can collect or file a lawsuit to collect the full balance of the offer or an amount equal to the original tax debt minus any payment received under the terms of the offer.
The number of 656 forms, application fees, and bid payments required are based on the types of taxes you want to commit.