How Do I Qualify for a Fresh Start OIC?

An OIC can be challenging to enter, as you do need to meet certain strict qualifications. Essentially, you’ll need to prove that you can’t reasonably pay the full debt you owe to qualify for an OIC (or in one circumstance, that you don’t legally need to). The IRS determines this by assessing three different factors:

Doubt as to Liability

Doubt as to Collectibility

Effective Tax Administration

Any of these factors being met can allow you to be accepted for an OIC. Let’s break down each of these three factors to help you understand whether or not you may qualify for an OIC.

The IRS may accept an OIC if they determine there’s doubt as to liability. To accept under this condition, the IRS will have to agree that there’s a genuine dispute about your tax liability amount. This means that they’ll have to agree that your tax debt shouldn’t exist or should be less according to the law.

When the IRS assesses doubt as to credibility, they’re looking to see whether or not they’d be able to collect your back taxes in any way other than an OIC. Essentially, the IRS will take a close look at your assets and estimated future income to see what you can pay and ensure you can’t pay your full amount before approving you for an OIC due to doubt as to credibility.

The IRS can also accept an OIC based on effective tax administration. With this option, the IRS will have to determine that you have the tax amount you legally owe and can pay in full, but doing so would cause you economic hardship or would be unfair and inequitable due to some kind of exceptional circumstance. For example, if a taxpayer could not reasonable pay their living expenses (such as their rent, monthly bills, and food expenses) and also pay their full tax liability amount, they may qualify under effective tax administration.

In addition to qualifying under one of these three circumstances, to qualify for an OIC you must be up to date on your tax filing and must not have any open bankruptcy proceedings. If the IRS accepts your OIC, you’ll have two payment options: a lump sum cash offer or a periodic payment offer.

Getting an IRS Fresh Start Initiative Offer in Compromise Approved

An OIC can be challenging to enter, as the IRS is strict about who qualifies because they want to collect as much of your owed tax as possible. For those who do qualify, however, getting an OIC can be an enormous relief, as it reduces your total amount of back taxes due. If you think you may qualify for an OIC and would like to enter one, we always advise seeking the services of a tax professional, which can greatly increase your chances of approval.