Offer in Compromise (OIC) or the Fresh Start Program

HomeServicesOffer in Compromise (OIC) or the Fresh Start Program

Incorporated since 2004, Accelerated Tax Solutions is a tax resolution firm serving clients in all 50 states. Our caring team of experienced attorneys, tax experts, tax preparers, and case managers has helped 1000s of individuals, families, and businesses address their state and federal tax liabilities.

     The New Fresh Start Program

Although many companies still use the term Fresh Start Program, the IRS calls the ability to settle your tax debt for less than you owe an Offer in Compromise. Basically, the taxpayer’s offer will be accepted if the amount represents the most the IRS can expect to collect in a reasonable amount of time.

OIC Guiding Principles

The IRS uses three guiding principles when considering any agreement:

  1. Doubt as to Collectability – Does any doubt exist that the taxpayer could ever pay the full amount of tax liability?
  2. Doubt as to Liability – Does a legitimate doubt exist that the assessed tax liability is correct?
  3. Effective Tax Administration – Do exceptional circumstance exist that would cause the taxpayer to suffer economic hardship or be unfair and inequitable even though the IRS could collect the full amount owed?

OIC Considerations

More specifically, the IRS addresses the following set of facts and circumstances when considering your application for an offer in compromise:

  1. Ability to Pay – Does the taxpayer have the ability to pay the full amount owed?
  2. Income – What sources of income does the taxpayer have?
  3. Expenses – What legitimate expenses does the taxpayer incur on a monthly basis?
  4. Asset Equity – Does the taxpayer have assets that could be liquified to pay the tax liability?
    Image of tax specialist and clients preparing financials: applying for an OIC can be a daunting task.

    OIC Eligibility Requirements

    Finally, the IRS uses the following eligibility requirements:

    1. Compliant – You must have filed all necessary returns and made all required estimated payments.
    2. Bankruptcy – You can’t be in a open bankruptcy proceeding.
    3. Current Year – The current year must be filed or have a valid extension.
    4. Employers – Tax deposits for the current and past two quarters must be made.

      Not Right for Most People

      The OIC is a great program for the right candidate, but it is very difficult to qualify for and might not be the right program even if you do qualify. For example, if you apply for an OIC and you aren’t eligible, the IRS will apply your offer payment to your balance due. So be prepared to lose those funds if you are denied. Additionally, applying for an OIC extends the statute of limitations on your debt. Finally, applying for an OIC requires submitting your full financial status, which might rule out other options. Our experienced staff of tax professionals will gladly discuss all the options you qualify for. If an OIC is right for you, our team will get it done.

      A Note about Offers in Compromise:

      Clients often report that they have heard companies claim they can reduce their tax liability to pennies on the dollar. If clients do qualify for these types of agreements, Accelerated Tax Solutions is quite experienced handling them. However, we don’t dangle these offers in front of our clients in what amounts to a bait and switch as many firms do. The IRS warns, “unscrupulous companies [engage in] scams commonly called OIC ‘mills’, which cast a wide net for taxpayers, charge them pricey fees, and churn out applications for a program they are unlikely to qualify for. In 2019, there were 54,000 OICs submitted to the IRS. The agency accepted 18,000 of them.”