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Categories: General Tax Terms

Offer in Compromise

An Offer in Compromise (OIC) is a settlement agreement between a taxpayer and the Internal Revenue Service (IRS) that allows the taxpayer to settle their tax debt for less than the full amount owed.

This option is typically considered when the taxpayer is unable to pay the full tax liability or doing so would create a financial hardship. The IRS evaluates the taxpayer’s ability to pay, income, expenses, and asset equity before accepting an OIC.

For example, if a taxpayer owes $10,000 but can demonstrate that they can only pay $4,000 due to financial difficulties, they may propose an OIC for the lower amount. If accepted, the taxpayer would pay the agreed amount, and the remaining tax liability would be forgiven.

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