The IRS Form 656 or Offer in Compromise (OIC) is the Holy Grail of the “tax debt relief” industry. Under certain circumstances the IRS may forgive (compromise) all or part of your tax debt. Websites and radio commercials give the impression that the OIC process is quick, easy, and usually successful. In fact it is slow, difficult, and seldom worth pursuing. Nothing pleases us more at Maui Tax Counseling than filing a successful OICs for our clients.
but we seldom file them. Why?
There are around two hundred million taxpaying entities (returns) in the U.S.
About 5%, or 10 million accounts have delinquent taxes due.
Last year 59,000 OICs were filed seeking tax debt reduction or elimination.
40% (24,000) were accepted.
The chances of an average delinquent taxpayer obtaining debt reduction through the OIC process are less than 3 in 1,000.
Who gets tax debt forgiveness?
Most successful OICs are accepted from people who have a negative net worth and limited future income prospects.
A significant number of successful OICs are filed by people who are disabled and have little or no ability to earn income.
Eligibility can be checked using an tool readily available on the IRS website.
If you are eligible for relief under an OIC Maui Tax Counseling will make certain you receive that relief. The Form 656 requires a great deal time to properly prepare, and can cost $5,000-$10,000 to file. We’ll let you know if one makes sense in your particular situation. Unfortunately, this is seldom the case.