Offer In Compromise In Ann Arbor, MI

In 2012, the IRS introduced the Fresh Start Initiative, a significant reform to federal tax collection policies. Among the most impactful modifications was a substantial expansion of the Offer in Compromise program, broadening access and enabling more taxpayers to meet the qualification standards for IRS debt resolution.

The Fresh Start Initiative restructured how the IRS calculates a taxpayer’s reasonable collection potential and future earning capacity. Under these revised guidelines, individuals can now factor in student loan obligations and outstanding state or local tax payments as allowable necessary expenses. Additionally, the program raised the thresholds for acceptable living expense deductions that taxpayers may claim when demonstrating financial hardship.

These IRS policy adjustments mean that many individuals who were previously ineligible for tax debt settlement now meet the criteria. However, expanded program guidelines don’t guarantee permanence—IRS regulations can shift, and qualification parameters may tighten. Successfully navigating an Offer in Compromise application also remains complex, requiring thorough documentation and strategic presentation of your financial circumstances. Working with an experienced tax resolution professional to guide you through the OIC submission process significantly improves your chances of approval. If you currently owe back taxes to the IRS, determining your eligibility under today’s program rules is critical. Should you qualify, taking prompt action ensures your offer receives consideration under the existing favorable guidelines before any future regulatory changes occur.

Submitting a valid Offer in Compromise application requires completing several specific IRS forms with accurate financial disclosures. For individual taxpayers pursuing tax debt resolution through this program, two primary documents form the foundation of the submission package. The first essential document is IRS Form 656, the official Offer in Compromise request. This form identifies the taxpayer seeking relief, specifies which tax years and periods the settlement will cover, and details the proposed settlement amount along with the requested payment terms. The taxpayer must sign this form to authorize the submission.

The second critical document accompanying Form 656 for individual applications is IRS Form 433-A, the Collection Information Statement. This comprehensive financial disclosure form itemizes all taxpayer assets, equity positions, monthly household income, and recurring living expenses. The IRS relies on Form 433-A along with supporting documentation—including bank statements, pay stubs, and property valuations, to conduct a thorough analysis of the taxpayer’s ability to pay. This financial assessment, combined with a complete review of the taxpayer’s unique facts and circumstances, determines whether OIC eligibility requirements are satisfied.

The IRS provides an Offer in Compromise Pre-Qualifier tool on their website designed to help taxpayers gauge potential eligibility for this settlement program. While this online calculator offers useful preliminary guidance, it cannot substitute for consultation with a knowledgeable tax debt resolution specialist. Numerous variables affecting OIC approval fall outside the calculator’s scope. A favorable result from the pre-qualifier doesn’t guarantee IRS acceptance of your offer. Conversely, an unfavorable calculator outcome doesn’t necessarily disqualify you from the program. Consulting with a representative who has demonstrated success in preparing and negotiating Offer in Compromise cases with the IRS remains the most reliable approach.

Taxpayers submitting an Offer in Compromise must typically include payment for the $205.00 application fee along with 20% of their proposed settlement amount. However, individuals meeting low-income thresholds may qualify for a fee waiver under IRS hardship provisions. These qualifying taxpayers are also exempt from the initial 20% down payment requirement when filing their OIC application. The low-income certification determination is calculated based on the taxpayer’s gross monthly household income relative to their family size, using federal poverty level guidelines. Business entities do not qualify for low-income certification status and must submit all required payments—both the application fee and 20% initial payment—with their Offer in Compromise submission.

Based on our extensive tax debt settlement experience working with both the IRS and the State of Michigan, these eight recommendations can prove invaluable for achieving Offer in Compromise approval:

1. Verify that all required federal tax returns have been filed and fully processed by the IRS before submitting your application.
2. Ensure current-year tax compliance by making all estimated tax payments and withholding obligations on time.
3. Complete all IRS forms with precision and clarity, avoiding errors that could delay processing.
4. Never omit or underreport assets or income sources. Incomplete financial disclosure damages your credibility with the IRS examiner and constitutes a federal offense.
5. Sign every required form and mail your complete application package to the correct IRS processing address, including the appropriate filing fees and 20% initial payment.
6. Attach all requested supporting documentation with your submission. Always send photocopies rather than original documents, as the IRS does not return submitted materials.
7. Respond promptly to all IRS information requests. The Offer in Compromise process operates under strict deadlines, and failure to meet response timeframes can result in the IRS returning your offer without consideration.
8. Retain an experienced tax resolution representative, like Austin & Larson Tax Resolution, to prepare, submit, and negotiate your Offer in Compromise on your behalf. This is a detailed and time-intensive process governed by complex IRS collection regulations and procedural requirements. Without thorough knowledge of these rules, you risk miscalculating your eligibility or failing to exercise your negotiation rights effectively. Partnering with a qualified representative who understands IRS protocols significantly increases your chances of a successful outcome.