What is an Offer in Compromise?

Before we continue, think about this question:

 What if you can’t afford to pay your IRS tax debt in full?

Many taxpayers are surprised to discover that the IRS may not always require the full payment of tax debts. Instead, you might qualify for an Offer in Compromise.

An Offer in Compromise (OIC) is an arrangement with the IRS that generally allows taxpayers to pay off their unpaid tax obligations for less than the total due. In many ways, it is similar to settling your debt with a credit card company for less than you owe.

This option is available to both domestic and international taxpayers, including U.S. citizens and residents living abroad (expats), nonresident aliens with U.S. tax liabilities, and others subject to U.S. tax rules. For international taxpayers, the IRS evaluates factors such as worldwide income, foreign assets, and financial situation when determining reasonable collection potential (RCP). Proper valuation and documentation of overseas accounts, property, or investments are often required, adding complexity.

While the IRS often accepts OICs, not everyone is eligible. The IRS weighs several factors, such as the taxpayer’s ability to pay, income, assets (including foreign ones), and overall financial picture. Tax treaties between the U.S. and other countries may also come into play for international taxpayers. These treaties can affect the taxation of certain income, provide relief from double taxation, or influence how U.S. tax obligations are determined before an OIC is considered.

Before deciding whether an offer in compromise is right for you, ask yourself these questions:

• Do you owe more to the IRS than you can afford to pay?
• Are penalties and interest making your tax debt harder to manage?
• Have you received IRS notices, a tax lien, or a levy?
• Do you live outside the United States but still owe U.S. taxes?
• Are you a foreign individual or business with a U.S. tax debt?
• Are you unsure whether you qualify for an Offer in Compromise?

At Arora Law PC, we can help determine your eligibility for an OIC, whether you are a domestic or international taxpayer, and assist with submitting a strong offer, including an installment plan if needed. International cases often require careful handling of foreign assets, treaty considerations, and compliance issues.