After the IRS accepts my offer in compromise (OIC), what are my obligations?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 16, 2021

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Once an “offer in compromise” is accepted and you are paying the compromised amount off in installments, it’s more important than ever that you maintain compliance with your filing requirements, estimated tax payments, and any and all payments for the offer in compromise. Failure to do so even once may result in your offer in compromise being rejected entirely; and then you will owe the amount you did before, minus the payments you already made.

Defining an Offer in Compromise

An offer in compromise is a negotiation between a debtor and a debt collector. In this case, the IRS has agreed to lower your tax debt to an amount that you can afford. In order to ensure that both you and the IRS understand what is being agreed to and to avoid anyone backing out of the agreement, an offer in compromise should always be drafted and signed by both you and the IRS agent who negotiated it. Once the paper is signed, it is a contract, and the rules of contract apply to its enforcement.

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When an Offer in Compromise Contract Can Be Rejected

If you neglect any of the terms in your offer in compromise contract, such as the amount of each payment or the due date for each payment, then the IRS may have grounds to reject your offer in compromise and begin attempting to collect the full amount of debt again. This rejection is permitted under the law to protect creditors from being taken advantage of by debtors. When you violate the terms of your contract, you are essentially communicating a counter-offer to the original contract, which makes the original contract offer invalid.

Getting Help Drafting an Offer in Compromise

If you are negotiating an offer in compromise with the IRS, it’s imperative that you contact a tax attorney for assistance with the negotiation and the contract drafting. Provisions do exist that can protect you from an IRS rejection of the offer in compromise contract should an unforeseen circumstance arise.

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