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File Back Tax Returns Before Submitting an Offer in Compromise

pre-OIC requirementsPre-OIC Requirements

Before you submit an Offer in Compromise (OIC) to the IRS, you must file all delinquent tax returns. If you send in an OIC and still have unfiled returns, the IRS will return your offer without even considering it.

Even worse, the IRS will keep an initial payment sent with the offer and apply it to your tax debt. Unlike a typical OIC rejection, you don’t have the right to appeal this decision.

Other Important OIC Requirements

The IRS has a good reason for implementing this policy. The OIC program allows some taxpayers to settle their tax debt for pennies on the dollar. Why should the IRS agree to settle your tax debt when they don’t know how much you really owe?

There are several other requirements you must meet both before and after submitting your OIC:

• If you are required to submit estimated tax payments, you must have made all required payment for the current year before submitting your OIC.
• You must stay current with all tax filings and tax payments while your offer is being considered.
• You must stay current with all tax filings and tax payments for five years after your offer is accepted.

If your OIC is accepted and you later miss a tax payment or filing, your offer will default. The IRS can then reinstate the full tax liability you owed before the OIC was accepted.

Why You Should File Delinquent Tax Returns

From a taxpayer’s perspective, it doesn’t make sense to submit an OIC when you have unfiled tax returns. Even if the IRS were to accept your offer, the settlement won’t cover the tax debt attributable to the unfiled returns. When you finally file the delinquent returns, you would once again be facing back taxes, penalties, and interest.

If you have to deal with the IRS, you’re better off trying to resolve your issues once and for all. For some taxpayers, this means you’ll need to file several years of delinquent tax returns before you try to settle your tax debt.

Once you’re current on all tax filings, your tax attorney can help you find a tax resolution option to works for your financial situation.

Contact An IRS Attorney For Free OIC Advice

Get free, confidential tax advice from a Michigan tax lawyer by calling Ayar Law at 248-262-3400 today.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.