Should You Go For an OIC?
A solution you may want to consider to help you address your IRS problems is to file an Offer in Compromise or OIC. Advantages You can negotiate a deal with the IRS to allow you to pay the amount that you can afford of your back taxes while the rest is cancelled. You'll have zero back taxes to pay and you can start over.
Your assets and salaries can't be seized throughout the review period. This should lessen your stress level somewhat.
Since a Notice of Release of Federal Tax Lien is released by the IRS within thirty days, your credit rating will improve, that is, when the OIC is honored and you've paid the amount agreed upon. Disadvantages The OIC will be public record for one year, allowing anybody access to your financial information that may bring you issues.
You must comply with all the provisions of the IRS Code that pertain to filing your returns and settling your taxes for 5 years from the time the IRS accepts your offer.
When you submit your OIC, the statute of limitations for collecting taxes (10 years) will be extended for the time the Offer is pending plus 60 days. Even if your OIC is not approved, this extension takes effect. Know that it can take the IRS one year to review an OIC. The good news is that, under new regulations, if it takes the IRS more than 2 years to review your OIC, it's deemed accepted!
If the OIC is accepted, you do not get to contest or appeal the tax debt figure.
You lose all tax refunds you may be expecting the calendar year the IRS accepts the OIC, including interest for that period.
You must fully disclose your entire financial history to the IRS. This might alert the IRS to something you didn't disclose in your OIC forms and give the IRS reason to audit you.
Defaulting on your OIC will cause the original amount owed including interest and penalties to be reinstated in full. The payments you made will be credited, however.
