IRS Offer in Compromise Las Vegas
How to resolve tax debt with legal guidance.
An IRS Offer in Compromise allows qualifying taxpayers to settle federal tax debt for less than the full amount owed. The IRS considers factors such as income, expenses, assets, and the taxpayer’s ability to pay when determining whether an offer is acceptable. In Las Vegas, Nevada residents may use this federal program to seek a resolution when paying the full tax liability is not feasible or would create significant financial hardship.
Wood Law Group helps Las Vegas taxpayers evaluate whether an Offer in Compromise may be appropriate for their circumstances.
The Offer in Compromise process requires careful preparation and detailed financial documentation. The IRS generally evaluates whether it can reasonably expect to collect the full tax liability and whether accepting a reduced amount would be appropriate under one of the recognized OIC grounds. Approval is not guaranteed.
Understanding eligibility, the required forms, and how the IRS calculates an acceptable offer is essential before submitting an application.
Who Qualifies for an IRS Offer in Compromise in Nevada
An IRS Offer in Compromise (OIC) is a formal agreement between a taxpayer and the IRS that can settle eligible tax debt for less than the full amount owed. The IRS considers an offer based on specific grounds and the taxpayer’s individual financial circumstances.
To qualify to submit an offer, you generally must:
- Have filed all required tax returns
- Not be in an open bankruptcy proceeding
- Have made all required estimated tax payments for the current year
- Have received a bill for at least one tax debt included in the offer
Business taxpayers with employees must also generally be current on required federal tax deposits.
The IRS considers three primary grounds for an Offer in Compromise:
- Doubt as to liability: There is a genuine dispute about whether the tax debt is correct or how much is owed.
- Doubt as to collectibility: The taxpayer’s financial circumstances indicate the IRS is unlikely to collect the full liability.
- Effective tax administration: The taxpayer does not dispute the liability, but collecting the full amount under the circumstances would be inequitable or would create economic hardship.
For a doubt-as-to-collectibility offer, the IRS considers income, expenses, asset equity, and other relevant circumstances when determining the taxpayer’s reasonable collection potential.
The application generally requires Form 656 and supporting financial information. If the IRS rejects an offer, the taxpayer generally has 30 days from the date of the rejection letter to appeal.
What Else to Know Before Filing an Offer in Compromise in Nevada
The IRS Offer in Compromise process has several requirements. Understanding them before filing can help prevent avoidable problems with an application.
The Application Fee and Payment Options
The current IRS application fee for an Offer in Compromise is $205. Taxpayers who meet the IRS low-income certification requirements may qualify to have the application fee and initial payment waived.
The initial payment depends on the payment option selected:
- Lump sum offer: Submit 20% of the total offer amount with the application. If the IRS accepts the offer, the remaining balance must generally be paid in five or fewer payments within five months.
- Periodic payment offer: Submit the first proposed monthly payment with the application and continue making the required monthly payments while the IRS evaluates the offer. The remaining amount is generally paid within 24 months of the offer’s acceptance.
For taxpayers who qualify for the low-income exception, these initial payments and the application fee may be waived.
Offer in Compromise vs. Installment Agreement
Both options can help taxpayers resolve IRS debt without making one full payment immediately. However, they work differently:
- Offer in compromise: May resolve eligible tax debt for less than the full amount owed.
- Installment agreement: Allows the taxpayer to pay the full tax balance over time according to an approved payment arrangement.
An OIC may be worth considering when a taxpayer cannot reasonably pay the full liability, while an installment agreement may be more appropriate when the taxpayer can ultimately pay the balance but needs additional time.
What Happens While the IRS Reviews Your Application
An OIC can affect IRS collection activity while it is pending. Generally, the IRS’s collection period is suspended while an offer is pending, and certain collection actions are restricted during that period. However, this does not mean that every form of IRS collection activity stops.
Interest and penalties can continue to accrue while the offer is being considered. Taxpayers must also remain compliant with their tax filing and payment obligations.
The IRS may request additional financial information during its review, so responding promptly to requests is important.
If the IRS Rejects Your Offer
A rejection is not necessarily the end of the process. If the IRS rejects an OIC, you generally have 30 days from the date of the rejection letter to appeal through the IRS Independent Office of Appeals.
Depending on the circumstances, other tax resolution options may also be available, including an installment agreement or currently not collectible status.
The IRS Offer in Compromise Process in Nevada
Navigating an Offer in Compromise requires careful attention to the IRS’s requirements. The process generally involves the following steps.
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Check eligibility. Before filing, determine whether you meet the basic requirements for submitting an OIC. You generally must have filed all required tax returns, made required estimated tax payments, and not be involved in an open bankruptcy proceeding.
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Review your financial circumstances. The IRS considers income, expenses, assets, and equity when evaluating an offer. This information helps determine the taxpayer’s reasonable collection potential.
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Complete the application forms. Depending on the circumstances, an individual may need Form 656 and Form 433-A (OIC), while a business may need Form 433-B (OIC), along with supporting documentation.
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Choose a payment option. A lump-sum offer generally requires a 20% initial payment. A periodic payment offer generally requires the first proposed installment with the application and continued payments while the IRS considers the offer.
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IRS review begins. The IRS reviews the financial information and may request additional documentation. The taxpayer should respond to requests and remain current with required tax filings and payments.
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The IRS accepts, rejects, or returns the offer. If the IRS accepts the offer, the taxpayer must comply with its terms. If the IRS rejects it, the taxpayer generally has 30 days to appeal. An offer that is returned for processing issues is different from a rejected offer and may have different options for reconsideration.
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Maintain compliance after acceptance. For OICs based on doubt as to collectibility or effective tax administration, taxpayers generally must timely file and pay federal taxes for five years following acceptance. Failure to comply can cause the agreement to default.
When to Talk to an Attorney About an IRS Offer in Compromise
An IRS Offer in Compromise in Las Vegas can involve detailed financial disclosures, IRS calculations, payment requirements, and strict procedural rules. If you are unsure whether an OIC is appropriate or need help determining how your financial circumstances affect the potential offer amount, speaking with a tax attorney can help you evaluate your options.
Wood Law Group helps Las Vegas taxpayers understand available tax resolution strategies and determine the appropriate next step for their circumstances.
Contact Wood Law Group to discuss your tax debt and available options.
Common Questions About IRS Offer in Compromise in Las Vegas
What happens if the IRS rejects my offer in compromise?
You can appeal the rejection within 30 days through the IRS Office of Appeals. An attorney can review your case and help you decide whether to revise your offer or pursue another resolution path.
Can the IRS collect my tax debt while my offer is being reviewed?
The IRS must pause most collection actions while your offer is under review. This pause also extends through the appeal period if your offer is rejected.
Does an offer in compromise affect my credit score?
The IRS does not report accepted offers to credit bureaus, so the offer itself won’t appear on your credit report. However, any existing tax liens on your record may still affect your credit until they are released.
Can I keep my assets if my offer in compromise is accepted?
You can generally keep your assets after acceptance, but the IRS will review what you own when setting the minimum offer amount. Assets with significant equity will raise the amount the IRS expects you to pay.
Are there tax consequences after an offer in compromise is settled?
The IRS may issue a Form 1099-C for the forgiven debt amount in some cases, which could be treated as taxable income. A tax attorney in Las Vegas can help you plan for any tax obligations that arise after your offer is accepted.
