Offer in Compromise Debt Reduction Eligibility and Determinations

What happens if the IRS accepts an Offer In Compromise?

If an Offer In Compromise is accepted, the following guidelines apply:

The taxpayer must pay the Offer In Compromise amount in accordance with the acceptance agreement.

The IRS will keep any tax refund, including interest due, as the result of an overpayment of any tax or other liability for the tax period extending through the calendar year the IRS accepts the Offer In Compromise.

A taxpayer may not designate a refund and/or overpayment to be applied to estimated tax payments for the following year. This condition does not apply if the Offer In Compromise is based on Doubt as to Liability only.

The taxpayer will waive their right to contest in court or otherwise, the amount of the tax liability.

If a Notice of Federal Tax Lien has been filed against a taxpayer, the IRS will release the lien once all payment terms of the Offer In Compromise are satisfied.

The taxpayer must remain in compliance with filing and payment of all tax returns for a period of five years from the date the Offer In Compromise is accepted or until the Offer In Compromise is paid in full, whichever is longer.

Failure to pay the Offer In Compromise on time, and/or to remain in compliance during the five-year period or until the Offer In Compromise is paid in full, whichever is longer, will result in the Offer In Compromise being declared in default.

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What happens if the IRS does not accept an Offer In Compromise?

Once the IRS determines it cannot accept an Offer In Compromise, the taxpayer will be advised of the reasons behind the decision.

The taxpayer will be afforded another opportunity to submit additional information that might cause the IRS to reconsider its preliminary decision to reject the offer.

The exception to this is when the taxpayer has an ability to satisfy the liability in full and has not pointed to special circumstances.

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How much interest am I going to pay if my Offer In Compromise is accepted?

Interest will not accrue on the taxpayer's accepted Offer In Compromise amount from the date of acceptance until the Offer In Compromise is paid.

Interest and penalties will continue to accrue on the unpaid tax liability while the Offer In Compromise is under consideration.

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Will I be entitled to receive tax refunds if my Offer In Compromise is accepted?

The IRS will keep any refund, including interest due, because of an overpayment of any tax or other liability, for tax periods extending through the calendar year the IRS accepts an Offer In Compromise.

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Can I designate any payments once my Offer In Compromise is accepted?

No. Refunds and overpayments may not be designated as estimated tax payments for the following year.

This condition does not apply if the Offer In Compromise was accepted under doubt as to liability only.

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Is a tax lien released when an Offer In Compromise is accepted?

The IRS releases a Notice of Federal Tax Lien when all of the Offer In Compromise payment terms are satisfied.

For an immediate release of a lien, a taxpayer can submit payment using a certified check and include a request letter.

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What happens if I do not meet all the terms of my accepted Offer In Compromise?

The IRS may default the Offer In Compromise and reinstate the entire tax liability, less all payments and credits received.

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What happens if I default my Offer In Compromise?

The IRS may take the following actions:

Immediately file suit to collect the entire unpaid balance of the Offer In Compromise

Immediately file suit to collect an amount equal to the original amount of the tax liability as liquidating damages, minus any payment already received under the terms of the Offer In Compromise

Disregard the amount of the Offer In Compromise and apply all amounts already paid under the Offer In Compromise against the original amount of the tax liability

File suit or levy to collect the original amount of the tax liability, without further notice

The IRS will not default an agreement when taxpayers have filed a joint Offer In Compromise with your spouse or ex-spouse, as long as you have kept, or are keeping, all the terms of the agreement, even if your spouse or ex-spouse violates the future compliance provision.

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What happens if I do not file my tax return or pay my taxes next year?

The Offer In Compromise will be defaulted.

An Offer In Compromise requires future compliance for a period of five (5) years from the date of acceptance of the Offer In Compromise, or until the offered amount is paid in full, whichever is longer.

Compliance is the timely filing and paying of all required returns and taxes.

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