At least one of three conditions must be met to qualify a taxpayer for consideration of an OIC settlement: This OIC program is available for any taxpayer, but is primarily used by individuals who are elderly, disabled, or have special extenuating circumstances.
An OIC based solely on the basis of DATL does not require the submission of financial information.
Doubt as to collectibility (DATC) means that the taxpayer will never be able to fully pay the tax bill.
The IRS will consider a settlement based on the following formula: Settlement amount = (monthly disposable income x a number of months) + the net realizable equity in the taxpayer's assets.
The taxpayer must establish that collecting on the tax liability would cause economic hardship, or in the alternative, "where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for accepting less than full payment.
"[1] An OIC can be submitted to settle any federal tax liability incurred under the Internal Revenue Code.
An offer submitted without the required fees is subject to rejections without appeal.
Once the offered amount has been paid, the taxpayer should request that the IRS remove the lien.
In 2004, the IRS issued a consumer alert warning of promoters' claims to settle debts for "pennies on the dollar" through the OIC program.
A recommendation is to check with the Better Business Bureau before contracting any firm to resolve tax problems.