Brief Summary
This video explains how to navigate the IRS Offer in Compromise (OIC) program, which allows taxpayers to settle their tax debt for less than the full amount owed. It cautions against using third-party companies that promise to settle tax debts, emphasizing that taxpayers can apply for an OIC themselves. The video outlines the eligibility requirements, the application process, and the use of the IRS's OIC Pre-Qualifier Tool to determine if an OIC is a viable option.
- Taxpayers can apply for an Offer in Compromise (OIC) directly through the IRS without using third-party companies.
- An OIC is a last resort for those who cannot pay their tax debt in full and meet specific eligibility requirements.
- The IRS provides an OIC Pre-Qualifier Tool to help taxpayers determine if they qualify and estimate a potential offer amount.
Introduction: Settling Tax Debt with the IRS
The video addresses taxpayers who are struggling to pay their tax bills and are considering settling their debt for a reduced amount through an Offer in Compromise (OIC). It warns against deceptive advertisements from companies that promise to settle tax debts for less, clarifying that while an OIC does allow taxpayers to pay less than what they owe, these companies often mislead people into thinking their services are necessary. The video emphasizes that taxpayers can pursue an OIC on their own without incurring additional costs beyond the application fee (which may be waived).
OIC as a Last Resort and Eligibility
Filing an OIC should be considered a last resort for taxpayers who have exhausted all other options to pay their tax debt in full, including payment plans. The video highlights that not everyone qualifies for an OIC, as specific eligibility requirements must be met. It also clarifies that the only additional cost charged by the IRS is an application fee, which can be waived under certain circumstances. The video encourages taxpayers to save time and money by submitting the offer themselves.
Step One: Payment Plan Qualification
The first step in determining whether an OIC is the right option is to visit IRS.gov/paymentplan to see if you qualify for a payment plan to pay the full amount owed. If you qualify for a payment plan, you may not qualify for an OIC, as the OIC is intended for those who cannot afford to pay their debt in full.
Step Two: Using the OIC Pre-Qualifier Tool
The IRS provides an OIC Pre-Qualifier Tool at IRS.gov/OICTOOL to help taxpayers determine if they meet the initial qualifications for making an offer. This tool uses the information you input to provide a proposed offer amount for your application.
Step Three: Information Needed for the OIC Pre-Qualifier Tool
To use the OIC Pre-Qualifier Tool, you will need to provide specific information, including your city, state, and zip code; household size; total federal tax debt owed; all assets (bank accounts, home and vehicle values, retirement accounts, etc.); household income (wages, self-employment, rental, etc.); and expenses (housing, transportation, federal, state, and local taxes, and other specified expenses).
OIC Tool Results and Application Instructions
If the OIC Pre-Qualifier Tool indicates that you are eligible for an OIC, it will provide a link to instructions on how to apply. The video reminds viewers that the tool is only a guide and does not consider special circumstances. Even if the tool suggests you may not qualify because your information indicates you can pay in full, you still have the right to submit an offer for consideration. The video advises following the application instructions closely to ensure smooth processing of your offer. The IRS will make the final decision based on your completed OIC application and a thorough financial review. Additional information can be found at IRS.gov/OIC.
