A successfully negotiated IRS Offer in Compromise, when filed correctly and accepted, will officially release you from debt to the IRS you simply cannot pay and back taxes. What’s more, you will be free of the stress and worry and your credit rating will improve. You will start over as a citizen, and be able to rebuild your credit. However, there are serious implications when you begin this process that everyone should be aware of.
The pitfalls and headaches of the OIC process
The OIC process is similar to credit negotiations, only much longer and tedious. Every year, the IRS only accepts a fraction of all the OIC filings it receives. Moreover, it regularly takes the IRS up to a year to approve your OIC. In the meantime, you can count on being strapped for cash and hassled by creditors.
- If an OIC is accepted, negotiations are over and you are required to pay the portion of the debt the IRS has stipulated.
- You are expected to disclose your entire financial history to the IRS. If you fail to do so, you could be subject to a full audit.
- Your OIC is public record for one year after it is accepted.
- If you fail to pay back the tax debt settlement reached in the OIC, you will be forced to pay back the original tax debt owed, plus interest and penalties in full.
OIC negations should be submitted under the most extraordinary circumstances. A poorly handled OIC can mean a lifetime of financial strain and struggle. Creditors are notorious for finding out problematic credit history, so even if you manage to get out from under the IRS debt, it could be years before creditors are willing to let you borrow again.