Offer in Compromise (OIC) is a program created by the IRS that allows taxpayers to settle their outstanding debt for less than the full amount that was originally owed—essentially creating a “fresh start” with the IRS. The idea behind the program is that many taxpayers cannot afford to pay their tax liability without causing a financial hardship on themselves and their household. When used correctly, this program can save you thousands of dollars.
How Your Offer in Compromise is Calculated
The IRS formula to calculate your OIC is a two-step process based on your monthly income and the value of your assets. The formula looks like this:
[(Monthly income – Monthly expenses) X 12 (Or 24)]
+ [(Value of assets – Loans/Mortgages) X .08]
= Offer in Compromise
This formula yields an average of $6,629 to the IRS. However, it could result in more or less for you depending on your individual finances. It’s important to note that the IRS only agrees with taxpayers’ valuations and calculations around 40% of the time.
Applying for an Offer in Compromise in Sacramento
Think you might qualify for an OIC? The team at our tax relief company in Sacramento will gladly help you form your offer and submit it to the IRS. The process involves the Offer in Compromise Booklet, which is the actual form required to make the offer, several supplementary forms relating to your financial situation, an application fee, and an initial payment. We will assist you throughout the process, and help you develop a realistic yet manageable offer so that you can get approved for the relief you deserve!
To learn more about the offer in compromise process, we encourage you to schedule an appointment with one of our team members. Contact Paramount Tax Relief in Sacramento today!