This payment is mandatory in addition to the application fee. The 20 percent payment is generally non-refundable, meaning that it will not be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without their acceptance. Instead, the 20 percent payment will apply to the taxpayer's tax liability. If you qualify to apply for an OIC, the IRS will then determine how much it will accept from you to pay off the debt.
The amount of the offer is also called reasonable charging potential (RCP). This is the amount that the IRS can reasonably charge you before the collection statute expires. If the IRS accepts your offer, you'll have to comply with the terms you agreed to and keep up to date with the filing and payment of your taxes for five years after that date. Your down payment should be 20% of what you offer to pay (if you pay in five or fewer installments) or your first monthly installment (if you pay in six or more monthly installments).
If the IRS rejects your offer, it won't refund your application fee or any other payments you made with the offer. They include the IRS financial analysis rules, which include what assets are included and excluded, and what are the average allowable expenses for the taxpayer. If the IRS accepts your offer, but you don't file or pay all your taxes on time for five years after acceptance, the IRS will notify you that your offer is in default and may cancel the offer and you'll owe all of your debt (not the reduced amount of the offer). In general, if you are not absolutely sure that the IRS will approve your OIC with the amount of the proposed offer, the OIC can be an expensive and impracticable solution.
This is how an IRS commitment offer works, what you need to qualify, and what you should know about the program. This money is non-refundable, even if the IRS rejects your offer (the IRS will simply apply it to your tax bill). You must work with the IRS to show that you are struggling financially to qualify and you may not receive a full refund. If the IRS processes your offer but closes it without accepting it, it will not refund the application fee or any other payments you made with the offer.
Instead, they'll have to calculate their net realizable capital in assets, plus a future multiplier of their monthly disposable income, which depends on the payment option they choose. He has been a leader in helping taxpayers and tax professionals resolve tax issues with the IRS, where he worked for 19 years in various compliance positions. Before taking up his current position, Jim's consultancy focused on the areas of tax controversy and tax administration, including leading the development of software products on tax issues for tax professionals, testifying before Congress, advocating for the transparency and efficiency of the IRS, and proposing innovative solutions on a large scale for taxpayers and tax professionals. If a compromise offer isn't for you or the IRS rejects it, you may still have other options through the IRS to obtain tax relief, such as applying for an installment payment plan or requesting the “currently uncollectible” condition.
A study presented by the Treasury Inspector General of Tax Administration revealed that the IRS did not contact taxpayers before the agreed date in 73 percent of the cases.