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What You Need to Know Before Filing an Offer in Compromise with the IRS


Posted in on August 13, 2021

If you are behind on your federal income tax liability, you may be thinking about submitting an Offer in Compromise (OIC) to the Internal Revenue Service (IRS). It would be nice to put your tax debt behind you, and plenty of companies offer to work with the IRS on your behalf to settle your debt for pennies on the dollar. Unfortunately, as the IRS explains, many of these offers are fraudulent. While it is possible to pay less than you owe, settling your tax debt with the IRS is not an easy process, and it is important to work with an experienced Virginia tax attorney to make sure you meet the requirements for submitting an acceptable OIC.

Here are five important facts you need to know before filing an Offer in Compromise with the IRS:

1. Using an Offer in Compromise “Mill” Will Likely Cost You More in the Long Run

The IRS warns taxpayers to avoid Offer in Compromise “mills”— companies that aggressively promote their services to underwater taxpayers. “Offer in Compromise mills contort the IRS program into something it's not – misleading people with no chance of meeting the requirements while charging excessive fees, often thousands of dollars.” Not only can you end up paying thousands of dollars in fees; but, if you do not qualify to submit an offer, or if a “mill” submits your offer incorrectly, you could continue to accrue interest and penalties with the IRS.

2. Not All Taxpayers Qualify to Submit an Offer in Compromise

Just because you are behind on your federal income tax liability, this does not necessarily mean that you qualify to submit an Offer in Compromise. Additionally, depending on why you are behind on your taxes, submitting an OIC might not be your best option. Before deciding how to attempt to resolve your tax debt, you need to discuss all of your options with an experienced Virginia tax attorney.

3. You are Required to Pay the IRS When You Submit Your Offer (In Most Cases)

When submitting an OIC, you must be prepared to pay an initial installment to the IRS. This installment is non-refundable and will be applied to your tax liability regardless of whether the IRS accepts your offer.

4. Filing an OIC Can Result in a Federal Tax Lien

When evaluating your Offer in Compromise, the IRS may place a federal tax lien on your property. In some cases, it can take the IRS years to evaluate an OIC.

5. Acceptance of Your OIC Isn’t Guaranteed

If you don’t hear from the IRS within two years, your OIC will be automatically accepted. But, otherwise, acceptance of your OIC is not guaranteed. To give yourself the best chance of submitting a successful offer (again, assuming this is your best option), you will need to work closely with an experienced tax attorney.

Schedule an Appointment with Virginia Tax Attorney Kevin E. Thorn

If you have questions about submitting an Offer in Compromise to the IRS, we encourage you to schedule a confidential initial consultation at Thorn Law Group. To request an appointment with Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 703-752-3752, email ket@thornlawgroup.com or inquire online today.

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