An Offer in Compromise (OIC) letter is a request to the IRS. You are asking them to settle your tax debt for less than you owe. People write these letters when they can’t afford to pay their full tax bill.
Writing this letter can feel daunting. But don’t worry, we’re here to help. We will share templates and examples to guide you.
This article provides samples of OIC letters. These samples will make it easier for you to write your own letter. Let’s make this process simple.
How To Write An Offer In Compromise Letter
[Your Name]
[Your Address]
[Your Phone Number]
[Your Email Address]
[Date]
Internal Revenue Service
Offer in Compromise Unit
[IRS Address]
Re: Offer in Compromise for [Your Name or Business Name]
Taxpayer Identification Number: [Your SSN or EIN]
Tax Years: [List Tax Years]
I am writing to submit an Offer in Compromise (OIC) to resolve my outstanding tax liabilities for the tax years listed above. I believe that my current financial situation prevents me from fully paying the amount I owe.
My offer is for a total payment of [Dollar Amount]. This amount reflects my ability to pay, based on my current income, expenses, and asset equity.
I have enclosed Form 656, Offer in Compromise, and Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B (OIC), Collection Information Statement for Businesses. These forms provide detailed information about my financial situation, including my assets, liabilities, income, and expenses.
As you can see from the enclosed forms, my ability to pay is limited due to [briefly explain your financial hardship; e.g., low income, significant medical expenses, business losses]. Paying the full amount of the tax liability would create a significant financial hardship for me and my family.
I believe that this offer represents the most the IRS can expect to collect from me. I am committed to fulfilling the terms of the offer if it is accepted.
I respectfully request that the IRS consider my offer and grant me relief from my tax liabilities. I am available to provide any additional information or documentation you may need to evaluate my offer.
Thank you for your time and consideration.
Sincerely,
[Your Signature]
How to Write How To Write An Offer In Compromise Letter
Understanding the Nuances of an Offer in Compromise
An Offer in Compromise (OIC) is essentially a settlement agreement with the IRS, allowing you to resolve your tax liability for a lower amount than what you originally owed. However, simply proposing a pittance won’t cut it. You need a compelling, justifiable reason and a meticulously crafted offer letter to even get their attention.
- Assess your eligibility. Not everyone qualifies, so ensure you meet the IRS’s prerequisites.
- Gather comprehensive financial documentation: income statements, bank records, asset valuations, and expense reports.
- Determine your Reasonable Collection Potential (RCP), which the IRS will use to evaluate your offer.
Crafting a Compelling Subject Line
The subject line is the IRS’s first impression of your offer. A vague or uninspired subject line could lead to your letter being relegated to the bottom of the pile. Be direct and unambiguous.
- Example: “Offer in Compromise – [Your Name] – Taxpayer ID [Your Taxpayer ID Number]”
- Avoid generic phrases like “Tax Settlement” or “Payment Proposal”.
- Clarity is paramount; the IRS should immediately understand the letter’s purpose.
The Salutation: Formality Matters
Address the IRS with the respect they expect. A proper salutation demonstrates professionalism and attention to detail. Never presume familiarity.
- Use “Internal Revenue Service” or, if known, the specific agent’s name followed by their title.
- If using a name, the standard greeting “Dear Mr./Ms. [Agent’s Last Name]:” is appropriate.
- If a name is unavailable, “To Whom It May Concern:” is an acceptable, albeit less personal, alternative.
Articulating Your Hardship with Precision
The body of your letter is where you present your case. Succinctly explain your financial hardship and why the IRS should consider your offer. Avoid hyperbole; stick to verifiable facts.
- Start by stating the tax years in question and the total amount owed.
- Clearly delineate the reasons for your inability to pay: job loss, medical emergencies, business setbacks, etc.
- Quantify the impact of these hardships on your financial situation. Use figures and supporting documents to substantiate your claims.
Presenting Your Offer: A Calculated Amount
The amount you offer should be realistic and defensible. Don’t arbitrarily pluck a number out of thin air; justify it based on your RCP and ability to pay. Be prepared to substantiate this offer with documentation.
- Clearly state the exact dollar amount you are offering.
- Explain how you arrived at this figure, referencing your RCP calculation.
- If offering a lump sum, emphasize your ability to pay promptly. If proposing installment payments, outline the proposed schedule.
Addressing Compliance and Future Obligations
The IRS wants assurance that you’ll remain compliant in the future. Acknowledge your commitment to meeting your future tax obligations.
- Explicitly state your intention to file and pay all future taxes on time.
- If applicable, mention any steps you’ve taken to improve your tax compliance habits.
- This demonstrates good faith and increases the likelihood of your offer being accepted.
The Closing: Professionalism Until the End
End your letter with a professional closing. A polite and respectful tone reinforces your commitment to resolving your tax liability amicably.
- Use a formal closing such as “Sincerely,” or “Respectfully,”.
- Include your full name, address, phone number, and taxpayer identification number.
- Consider adding a brief statement reiterating your willingness to cooperate with the IRS.
Frequently Asked Questions: Offer in Compromise Letters
An Offer in Compromise (OIC) allows certain taxpayers to resolve their tax liabilities with the IRS for a lower amount than the total owed.
Understanding the OIC process and crafting a compelling OIC letter is crucial for a successful outcome.
What is the purpose of an Offer in Compromise (OIC) letter?
The OIC letter formally proposes a settlement to the IRS to resolve a tax debt for less than the full amount owed.
What key information should be included in an OIC letter?
The letter should clearly state your name, address, Social Security number or Employer Identification Number, the tax years involved, the amount you are offering, and the reasons why the IRS should accept your offer.
What are the common grounds for an Offer in Compromise?
Common grounds include doubt as to liability, doubt as to collectibility, and effective tax administration.
How do I demonstrate doubt as to collectibility in my OIC letter?
Provide a detailed account of your assets, income, expenses, and financial hardships that demonstrate your inability to pay the full tax liability.
Where should I send my Offer in Compromise letter?
The letter should be sent to the IRS service center that handles OICs for your geographic location, as specified on the IRS website.
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