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Offer in Compromise
Taxpayers that owe taxes and cannot pay them in full can enter into collection alternative agreements with taxing authorities. When the taxpayer lacks the funds to pay the taxes before the collection statute expiration date (CSED), they may be able to enter into an Offer in Compromise Doubt as to Collectibility (OIC-DATC) agreement to settle their tax for less than they owe.
A tax lien may be filed by a federal (Internal Revenue Service [IRS]), state or local taxing authority when an OIC agreement is accepted depending on the factors involved. If an Offer in Compromise submission is denied by a taxing authority, taxpayers have the right to appeal the decision.
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Offer in Compromise Doubt as to Liability (OIC-DATL)
Offer in Compromise Doubt as to Collectibility (OIC-DATC)
In this scenario the taxpayer disputes that they owe the assessed tax or that the assessed tax is incorrect. This is different from an Offer in Compromise Doubt as to Collectibility (OIC-DATC) when the taxpayer agrees that the tax was correctly assessed, but just does not have the ability to pay the tax liability in full. OIC-DATL is less common than an OIC-DATC and not as widely known amongst the public. The taxpayer cannot offer $0 and must offer something to the taxing authority, at least $1. OIC-DATL must be contrasted with audit reconsideration to determine which among the two is the best course of action.
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