Tax Debt Solutions Blog

Offer in Compromise: The Pros and Cons

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Pros and Cons:  Offer in Compromise

Pros:

• If an OIC is granted, it saves money if your offer has interest continues to accrue and deferred payments according to the OIC and not the initial sum owed.
• If your offer is turned down there is less stress during the procedure because usually property and salaries aren’t seized during that time.
• Tax liens must be relinquished by the IRS within thirty days of receiving the agreed amount for an OIC from you. When a Certificate of Release of Federal Tax Lien becomes public your credit rating recovers.

Cons:

• Once an OIC is agreed to you are obligated to file upcoming tax returns and make tax payments on time for five years.  This applies to payroll tax and estimated business tax, if self-employed.
• If accepted or rejected, the IRS has more time to collect tax owed when you file an offer.  They add the time the offer is under deliberation and thirty days to the usual limitation of ten years to collect.
• All tax refunds before your offer and during the year of acceptance by the IRS must be forfeited.  You may have to forfeit refunds for three to five years.
• Subsequent to submitting an offer you may not appeal to the IRS or court for years stated in the offer.  This applies if offer is accepted or rejected.
• The IRS will revoke an offer after acceptance if you were untruthful.
• It’s not usual but the IRS can audit you during the OIC process depending on what you reveal or withhold.
• The OIC can be revoked if you don’t make a payment.  You will be liable for the initial amount, penalties and interest.  The same pertains if you don’t file and pay all taxes for five years prior to an OIC acceptance.