The Offer in Compromise, quite understandably, generates an ample amount of curiosity amongst both the individual and the business taxpayer. For the uninitiated, the offer in compromise is an attempt by the IRS to reach an agreement with taxpayers who are unable to pay their tax debts in full within the stipulated time, to allow them to settle their debts by tendering a partial amount. It is however, not automatic and the taxpayer needs to file on time.
Despite that ominous deadline… filing for an OIC is a long, drawn out, and complicated procedure. If you too have submitted your application, then it would help to know that there can be several outcomes arising out of this submission.
How to Proceed After Acceptance
The IRS is accepts about 16% of the offers submitted. If yours has been, it is now imperative that you know what your course of action is.
Ensure that you have a written notification from the IRS informing you about the final acceptance of your offer. The acceptance comes into effect from the date quoted in this notification letter. The final acceptance of your offer in compromise is a guarantee that your tax liabilities specified in the offer (you filed) have been conclusively settled. However, this acceptance does not mean that the tax dues of any other individual not mentioned in the offer — this is more important for married couples filing jointly or business partners.
Remember though, if you still owe some money, that is due as well. What you would normally owe or even if there was an error, your Offer could have been just a compromise with you offering to pay something, but just a portion of what the IRS says is due.
After the final acceptance of your Offer, you also need to ensure that you comply with all the terms laid down in section 8 of Form 656 and this includes the rules pertaining to filing the requisite tax returns and tendering all payments. This harkens back to what was just mentioned. Otherwise the federal tax liens will not be released. Also, after your Offer has been finally accepted and approved by the IRS, any refund that you are entitled to during the calendar year in consideration will be accounted for when calculating your revised tax liability.
Now that you are aware of all that is to know about what happens when the IRS finally accepts and approves an Offer in Compromise, you can plan your course of action.