Offer in Compromise – Tax Settlement

Offer in compromise is a process in which you can reduce your Internal Revenue Service or State tax debt by negotiating with the taxing agency to lower your tax bill. This process is often referred to as settling your taxes for “pennies on the dollar.”

Settle Tax Debt with an Offer in Compromise:

Struggling with overwhelming tax debt? An Offer in Compromise (OIC) could be your path to financial relief, allowing you to settle your tax obligations with the Internal Revenue Service (IRS), California Franchise Tax Board (FTB), or California Department of Tax and Fee Administration (CDTFA) for significantly less than you owe—sometimes referred to as “pennies on the dollar.” At Tax Lawyers Group APC, our experienced Los Angeles tax attorneys specialize in navigating the complex OIC process, helping clients reduce or eliminate tax debt and regain control of their finances. With a proven track record of securing favorable OIC outcomes, we are committed to analyzing your case meticulously and advocating for you.

What is an Offer in Compromise?

An Offer in Compromise is a negotiated agreement between a taxpayer and a taxing authority (IRS, FTB, or CDTFA) to settle a tax debt for less than the full amount owed. This program is designed to provide tax relief for taxpayers facing financial hardship, disputes over tax liability, or exceptional circumstances that make full payment unjust. By successfully negotiating an OIC, you may significantly reduce your tax bill, avoid aggressive tax collection actions like tax liens or levies, and achieve a fresh financial start.

The IRS, FTB, and CDTFA evaluate OIC applications based on strict criteria, assessing your ability to pay, the validity of the tax debt, and the fairness of collection. A well-prepared OIC requires a thorough understanding of tax laws, meticulous financial analysis, and strategic presentation to meet the agency’s standards. Our Los Angeles tax attorneys at Tax Lawyers Group APC have the expertise to guide you through this process, maximizing your chances of approval.

Three Grounds for an Offer in Compromise

To qualify for an OIC, your case must align with one of three primary arguments:

1. Doubt as to Tax Collectability: You owe the tax but lack the financial resources to pay the full amount. This is the most common basis for an OIC, applicable to taxpayers whose assets and income are insufficient to cover the debt. The taxing agency will assess your “reasonable collection potential” (RCP), which includes the value of your assets (e.g., real estate, vehicles, savings) plus your projected disposable income over a specified period (typically 4–5 years for the IRS).
2. Doubt as to Tax Liability: You dispute the tax debt, arguing that the taxing agency’s assessment is incorrect. This applies if you believe you don’t owe the tax as claimed, often due to errors in the agency’s calculations, misinterpretation of tax laws, or missing documentation. Proving this requires a detailed review of your tax records and filings.
3. Effective Tax Administration (ETA): You owe the tax and have the ability to pay, but full collection would cause undue economic hardship or be unfair due to exceptional circumstances. For example, paying the full debt might jeopardize your ability to afford basic living expenses or harm your health. ETA cases are less common but can apply in situations involving elderly taxpayers, severe medical conditions, or other compelling factors.

Each taxing agency has its own OIC program with specific eligibility requirements and evaluation processes. Our team at Tax Lawyers Group APC is well-versed in the nuances of IRS, FTB, and CDTFA OIC programs, ensuring your application is tailored to the appropriate agency and argument.

The OIC Process: Key Considerations

Securing an OIC is a complex and rigorous process. The IRS, FTB, or CDTFA will only accept an offer if it meets or exceeds their calculated reasonable collection potential. Key factors in the process include:

• Financial Disclosure: You must provide a complete and accurate picture of your finances, including income, expenses, assets, and liabilities. This is typically submitted via IRS Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses, along with supporting documentation like bank statements, pay stubs, and asset valuations.
• Minimum Offer Amount: For “Doubt as to Collectibility” cases, your offer must at least equal the value of your assets plus the amount the agency believes it can collect from your future disposable income over 4–5 years (for IRS OICs). Disposable income is calculated by subtracting allowable living expenses (based on IRS standards) from your gross income.
• Rejection Risks: The taxing agency will reject your offer if it believes it can collect more through regular enforcement actions, such as wage garnishments, bank levies, or asset seizures. Common reasons for rejection include underestimating asset values, failing to account for future income, or submitting incomplete documentation.
• Compliance Requirements: To qualify for an OIC, you must be current on all tax filings and payments, including estimated tax payments or withholding for the current year. Non-compliance can lead to automatic rejection.

Given these complexities, it’s critical to approach the OIC process with a strategy that aligns with the taxing agency’s perspective. At Tax Lawyers Group APC, our Los Angeles tax attorneys conduct a thorough analysis of your case, adopting the mindset of an IRS, FTB, or CDTFA officer to craft a compelling offer that meets their criteria.

Why Choose Tax Lawyers Group APC?

At Tax Lawyers Group APC, our Los Angeles-based Offers in Compromise attorneys and staff bring decades of experience and specialized training to help clients settle tax debts efficiently and effectively. Our proven approach has delivered quick and favorable OIC outcomes for countless taxpayers, reducing or eliminating tax liabilities and preventing aggressive collection actions. Here’s how we can help:

• Comprehensive Case Analysis: We perform an in-depth review of your financial situation, tax records, and debt details to determine the strongest basis for your OIC (collectibility, liability, or ETA). Our team calculates your reasonable collection potential with precision, ensuring your offer is realistic and persuasive.
• Strategic Offer Preparation: We prepare and submit a meticulously documented OIC package, including IRS Form 656 (Offer in Compromise), detailed financial statements, and supporting evidence. Our goal is to present a compelling case that maximizes your chances of approval.
• Expert Negotiation: Our tax attorneys negotiate directly with the IRS, FTB, or CDTFA on your behalf, advocating for your interests and addressing any concerns raised by the agency. We handle all communications to reduce your stress and ensure accuracy.
• Compliance Guidance: We ensure you meet all eligibility requirements, such as filing past-due returns and making required payments, to avoid rejection. If issues arise, we work to resolve them promptly.
• Total Tax Solutions: Beyond OICs, we explore additional tax relief options, such as tax bankruptcy, installment agreements, penalty abatement, or currently not collectible status, to achieve the best possible outcome for your situation.

Our commitment to personalized service, attention to detail, and deep knowledge of tax law sets us apart. We understand the emotional and financial toll of tax debt, and we’re dedicated to helping you achieve a fresh start.

Common Scenarios for OIC Success

While every case is unique, certain scenarios are particularly well-suited for an OIC:

• Financial Hardship: You have limited income, high medical expenses, or significant debts, making full payment impossible. For example, a taxpayer with $50,000 in tax debt but only $10,000 in assets and minimal disposable income may qualify for a reduced settlement.
• Disputed Tax Liability: You received a tax assessment due to an error, such as unreported deductions or misclassified income. By providing corrected documentation, you may eliminate part or all of the debt.
• Exceptional Circumstances: Paying the full tax debt would leave you unable to afford basic living expenses or exacerbate a serious health condition. For instance, an elderly taxpayer with fixed income and high medical costs may qualify for an ETA-based OIC.

Our team at Tax Lawyers Group APC has successfully represented clients in these and other scenarios, securing substantial reductions in tax debt and protecting their financial stability.

Take the First Step Toward Tax Debt Relief

Contact our Los Angeles tax attorneys today at (310) 788-9820 to schedule a confidential consultation. We’ll review your financial situation, assess your eligibility for an OIC, and develop a tailored strategy to reduce your tax burden. Visit our website for more information on our services.