The Offer in Compromise process is notoriously difficult. The chances of your OIC being accepted are comparable to getting into a top-brass college. The OIC process is a case-by-case process, where one misstep can blow your entire appeal to pieces. You should know a few not-so-fun facts before you begin the lengthy OIC process.
Officially property of the IRS
Money and assets seized by the IRS to pay back delinquent taxes, also known as a levy, will not be credit on your offer in compromise.
Once the IRS takes it into possession, consider it gone, and you owe still, in full, whatever you agree to in an Offer in Compromise.
It should be fairly obvious—you aren’t going to get any tax refunds until your debt to IRS is paid in full. If you are lucky enough to reach an OIC settlement, consider this practice another condition of your settlement.
No promises on good intentions
With your OIC application, you will be required to submit a $150, non-refundable application fee and a percentage of your OIC settlement. Even if the IRS rejects your settlement, this money stays with the IRS and you get nothing in return.
Your tax lien isn’t null and void until your debt to the IRS is paid in full. While you have reached an agreement through the OIC process with the IRS, they will not remove the ‘tax lien’ status from the official record until you have paid back in full. Creditors have access to this information for one year, so expect there to be something of a financial domino effect.
During the period the IRS investigates your OIC, they will continually extend the statute of limitations on your case. If you have no hope of being accepted, you are potentially tacking on extra years of investigation and hassle.