A transaction offer allows you to pay off your tax debt for less than the full amount you owe. It can be a legitimate option if you can't pay your full tax liability or if doing so creates financial difficulties. You must include 20% of the offer amount in your request (in addition to the application fee). This money is not refundable, even if the IRS rejects your offer (the IRS will only apply it to your tax bill).
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. If you're deeply indebted to the IRS and don't have an end in sight, you might want to consider a compromise offer (OIC).
An OIC is a payment plan with the IRS in which the taxpayer can propose to pay a smaller amount and the IRS will forgive the rest. Taxpayers who can pay what they owe through an installment agreement or other means do not qualify for a transaction offer (OIC) and the IRS says it will not accept a commitment offer unless the amount offered is equal to or greater than the potential for reasonable collection. If a taxpayer submits a lump sum cash offer, they must include on Form 656 a non-refundable payment equivalent to 20 percent of the offer amount. For step-by-step instructions and all the necessary blank forms, including requirements for people with low incomes, read the IRS brochure on pledge offers.
If you don't qualify for a transaction offer or if your offer is rejected, seek debt solutions, such as liquidation and consolidation. 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). The minimum offer that the IRS will accept varies depending on the circumstances, depending on the level of doubt that arises. When considering a transaction offer based on effective tax administration, keep in mind that the IRS will consider all the facts and circumstances of the case; this includes the taxpayer's full history of compliance with tax laws.
IRS public inspection files on transaction offers include the taxpayer's name, city, state, zip code, amount of liability, and terms of the taxpayer's offer. Announcements about how to settle their tax debt for cents on the dollar generally refer to the process of requesting a commitment offer from the IRS, or OIC, which is an IRS program designed to help people pay at least part of their tax debt. Before making an offer to the IRS, check your eligibility and understand what the IRS is considering. 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.
Under these circumstances, the assets and income of both the taxpayer and the non-responsible spouse will be taken into account in the offer decision. There are many advantages and disadvantages to deciding if a transaction offer is the right next step in resolving your debt to the IRS. Flat-rate cash offer: Taxpayers can choose to pay the offer amount in a lump sum or in installment payments. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with Form 656.
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