The Offer in Compromise (OIC) is a tax settlement for taxpayers who are unable to pay their taxes in full due to economic hardships. The Offer allows taxpayers, both individual and business, to be able to pay only a portion of their dues, settle their debts, and make a “fresh start.” The Offer is not “automatic” and the IRS evaluates each and every application separately and is known to be extremely stringent when it comes to weighing the merits of every case. So, it is natural that an OIC-applicant would be curious to know how likely it is that his Offer is approved.
All the Necessary Documents
An Offer in Compromise may be submitted on two grounds—doubt as to liability wherein the taxpayer has tangible reasons to doubt the accuracy or even the existence of the tax debt, and doubt as to collectibility wherein the taxpayer is unable to pay his tax dues in full within the stipulated period. The chances of your Offer being approved increase manifold times if you submit all the relevant supporting documents along with your OIC forms. However, the crux is probably the written statement that you provide along with the other necessary paperwork.
The Severity of the Situation
This is an explanation of your financial situation—that you are unable to pay the entire tax debt within the stipulated time or doing so, would jeopardize your financial situation and you may even have to open the door and walk into a loan agreement—or evidence that corroborates your doubt as to the preciseness of the tax debts claimed against you.
Unknown to many a taxpayer, the likelihood of a “doubt as to collectibility” Offer being accepted increases or decreases based on the amount of the offer presented. An adequate offer is one that is reasonably close to the collection potential estimated by the IRS. Therefore, to ensure that there is no hindrance from this standpoint, it is imperative that you engage the services of a competent and experienced tax professional to calculate an “adequate offer.” An offer is adequate if its amount is more or less equivalent to the value of your equity in assets that the collecting authorities can practically acquire through administrative and judicial processes.
Your mission here or intentions will probably not make it too far if your offer is zero, nothing, or something way off the mark. An offer of that stature will probably render your entire application, Offer, or case mute.
Nothing is Absolute
It is widely acknowledged that the IRS only approves about 16% of the OIC claims filed, and a tax professional can only do so much to ensure that the likelihood of acceptance of your Offer increases. But you must remember that he cannot guarantee it.