OIC and Penalties and Interest
Penalties and Interest, as well as the original debt, represents an amount the IRS will consider settling if the taxpayer qualifies for an Offer in Compromise. When an OIC is filed, it is understood the taxpayer is requesting to pay a lower amount which includes the interest and penalties on the original debt. By law, the IRS will never reduce interest, however, through an Offer in Compromise, a taxpayer can indirectly reduce or eliminate Penalties and Interest.
The OIC Application
An Offer in Compromise is based on a complex formula. The IRS will compare your Offer amount to an amount the IRS could reasonably collect over time. By time, I mean the remaining Statutes of Limitation on the collection time allowed by law.
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 debt, nor Penalties and Interest. That is because an OIC has nothing to do with what you owe, only what the IRS could collect.
Should you get help?
I have seen many people try to prepare their own OIC and fail because they do not fully understand the art of dealing with the IRS. Yes, you can submit an Offer in Compromise yourself but if you are trying to considerably reduce your debt, I recommend you rethink your position.
An “accepted” OIC is not the same as a “successful” OIC.
There is more to it. Sure, the average taxpayer can fill out the forms and after spending hours reading and rereading the instructions provide the substantiation needed for an application to be accepted. How do you measure success? To me, success is measured with an approval on the LOWEST DOLLAR AMOUNT the IRS will accept.
If you feel that you may be in over your head, or just want to get a second opinion, let’s set up a short call. To avoid the back and forth emails and phone tag, I have included a link to my Calendar https://calendly.com/taxman/tax-problem-resolution-initial-consultation. Let’s set up a 30 min. phone conference to get to know each other. The phone number to call is 855-829-5877 and my extension is 203.