How Long Does an Offer in Compromise Take to Complete?
If you Google, how long does an OIC take? You will receive answers anywhere from 3 months up to more than a year. The reason is because the IRS doesn’t have a timeline of what Offer will take this long to process. The only deadline the IRS has when it comes to filing an OIC is two years.
If you file an Offer, and the IRS deems the Offer processable they have two years to issue a determination. If within that two years a determination has not been issued, then your Offer is automatically accepted. The chances of this happening, however, are very slim. 99% of the time, the IRS will always issue a determination, even if it’s on day 364.
What Is an Offer in Compromise?
An Offer in Compromise is an agreement between you and the Federal Government to settle your back taxes for less than you owe.
An Offer in compromise is strictly based on numbers; basically, your income versus your expenses and the equity in your assets.
If you can prove to the IRS you do not have the ability to pay back your taxes in full before the Statute of Limitations expires, then you may be eligible to file an Offer in Compromise. However, it will depend on your Reasonable Collection Potential and how much time is left before Statute of Limitations on the debt expires.
As of the IRS stats in 2017, only 40% of Offers were accepted, meaning only 25,000 out of 62,000 submitted were accepted.
How Long Will You Wait for an Offer in Compromise?
How long will this process take? To be blunt, quite a bit of time. Once you submit your Offer it will first be reviewed by an Offer Reviewer. They will research to ensure you are in compliance and have made your expected payments, including ETP’s and/or FTD’s. If you fail to do so, they will typically send a letter informing you of this error and you then have 14 days to comply. If you do not, then your Offer will be returned without further consideration. In some cases, this first process can take up to six months as Offers are handled on a first in, first out basis.
Once your Offer is accepted for processing, the Offer Reviewer will forward it to an Offer Examiner for further review. They will do more in-depth research and will, ultimately, be the one to accept or deny your Offer. This process can take anywhere from 60 days to over a year, as again, Offers are worked on a first in, first out basis. The Offer Examiner will decide to either accept your offer, increase it, or deny the offer.
If you disagree with the Offer Examiner’s denial or increase, you can file for an Appeal to have your Offer be reconsidered by a Settlement Officer from the Appeals Office. This process will take 30 plus days to be forwarded to a Settlement Officer.
Lastly, if your Offer is accepted, you must remain in compliance for five years. Your case will be reviewed and managed by a Tax Examiner to ensure compliance. Any slip will result in a letter being sent and almost certainly a letter of default not too long after that. In addition, they will review your tax returns over the next five years to ensure there are no red flags that did not match the information you entered with your Offer.
How Much Tax Debt Do You Owe?
An OIC is an application to settle a tax debt for an amount or offer including Penalties and Interest. Nowhere on the OIC application do you list the amount of the debit, nor P & I. This is because an OIC has nothing to do with what you owe, only what the IRS could collect.
Are You in Too Deep?
As we have lined out in this article, filing an Offer in Compromise is not an easy and sometimes not the best resolution to your tax debt. It requires knowledge of how the IRS works, what are they looking for, what are the red flags and how to avoid them.
Our acceptance rate for an Offer in Compromise is currently 88%. We only accept cases we believe can get approved. People ask, why it is not almost 100%. Even in our cases we get clients that do not want to disclose all their income or forget about an asset. We take greats step in our questionnaire and disclosure process to try and prevent this from happening, but sometimes we get surprised by what an Offer Examiner discovers.
Our Firm, Legacy Tax & Resolution Services, LLC is experienced in working with the IRS. Before we even consider filing an Offer, we do an extensive financial analysis to ensure that is your best option. We calculate your payments based on the CSED’s and would this even work with your current financial condition.
We work for the taxpayers, not the IRS, and want the best resolution for our clients.