If you can't pay all of your tax debt or if paying it all will cause financial difficulties, an offer of commitment (OIC) may be an option. The IRS will calculate the correct amount of the offer. If it's more than you offered and you don't have special circumstances, the IRS will give you an opportunity to increase the amount of the offer. If you don't, the offer will be rejected.
If the IRS determines that you can pay the full liability, you can request an installment agreement. Taxpayers who can't pay the full amount they owe can make alternative payment arrangements, such as an installment agreement or a transaction offer, to void their certification. If the IRS accepts your offer, but you don't file or pay all your taxes on time for five years after the acceptance, the IRS will notify you that your offer is in arrears and can cancel it and you will owe all of your debt (not the reduced amount of the offer). The IRS will keep any refunds, including interest, that may be due in connection with tax returns filed up to the date the IRS accepts the offer.
When the IRS terminates an OIC, the agreement is no longer in effect and the IRS can then collect the amounts originally due (minus payments made), plus interest and penalties. For example, the IRS may recommend revocation if the IRS revoked a taxpayer's certification because they pledged to pay and didn't. For the IRS to consider a compromise offer: an agreement between a taxpayer and the IRS for the taxpayer to pay less than the total amount due. In addition, the IRS can return the offer to you if you don't respect the application fee or the payment of the offer, or if you don't provide the information requested by the IRS.
Applicants must submit the form to the IRS within 30 days of the date of their letter of acceptance of the installment agreement to ask the IRS to reconsider their situation. While the IRS generally suspends other collection activities (such as taxing your salary or bank account) while your offer is pending, the IRS can file a federal tax lien notice to protect your right of retention on any property you own and to notify other creditors of such interests. The IRS will keep any refunds, including interest, for tax periods that extend until the date the IRS accepts your offer. The letter will explain why the IRS rejected the offer and will provide detailed instructions on how the taxpayer can appeal the decision to the IRS Independent Office of Appeals.
Keep a careful record of the dates. If the IRS does not refuse, return, or you withdraw your offer within two years of the date the IRS receives it, the offer will be considered accepted. However, the IRS will send you a notice 30 days from the date of the notification to respond to the IRS request that you reconsider the decision to return the offer. As part of the accepted offer agreement, the IRS will keep any refunds, including interest, of taxes due until the date the IRS accepts the offer.
