Settling your debt with the IRS is a very compelling idea, particularly if you owe thousands of dollars in Federal taxes. When you are in the 24% of Americans who succeed at Offer in Compromises (OICs), an OIC can be the end of a nightmare, allowing you to move on in life without an onerous tax debt. However, you really shouldn't file an OIC unless your qualify. If you don't qualify, filing an OIC can be a big mistake.
- A Failed OIC Freezes Clock on your Debt - A failed OIC will freeze the clock on your tax debt for the duration of your OIC review (usually four to ten months) plus an additional thirty days (penalty).
- Tax Debts Expire in 10 Years - Failed OIC extends that - Like a bankruptcy that doesn't discharge your tax debt, a failed OIC is really damaging when you have tax debt that is about to expire. Losing an OIC on an old tax debt means you unnecessarily added months if not a year to a debt that would have expired much sooner.
What's the Right Way to Handle your IRS Debt?
- Avoid Most Tax Relief Companies - Hiring a tax relief company can be expensive and in many cases, worsen your situation. Our list of eight reasons to avoid most tax relief companies is persuasive.
- Consult with Licensed Tax Professional - An experienced licensed tax pro (Enrolled Agent or Tax Attorney) is not going to mislead you. If he/she believes that an OIC is going to be a bad move for you, they won't send you don't that path.
- Consider Other Options - If you aren't in one of the 24% of Americans that that will get an OIC, you might have to think of other options like A. Livable installment agreement B. a penalty waiver C. Letting your tax debt expire (!)