There are a lot of advantages to filing an IRS Offer in Compromise (OIC) when you are stuck with a tax bill that you just can't pay.
When you file an OIC, not only is the tax debt gone but the IRS can't collect it ever*, even if you win the Powerball the next day. Filing an OIC is great as there is no negative mark on your credit, unlike Bankruptcy. In fact, a few weeks after you pay your OIC, any active federal tax liens filed against you are automatically released — improving your credit score by as much as 100 points.
Yet, an OIC is not-so-secret of an affair. Accepted Offers in Compromise are available for view by the public. From a recent Treasury Inspector general report (Click here to download TIGTA report):
"OICs have been available for public inspection for more than 60 years. In the early 1950s, an IRS employee was indicted for taking bribes from taxpayers seeking to compromise their outstanding tax liabilities. A congressional investigation revealed that the IRS had accepted offers with generous terms from racketeers and politically connected individuals. In response, President Truman issued Executive Order 103863 in 1952 directing the IRS to open for public inspection any accepted OIC."
So OICs are public records. But very few people ever see them. Very few. The reason? Because they are in paper format and apparently it is very time-consuming for the record-keepers at the IRS to redact (we hope) sensitive information and then process the request to get the paper work together.
The government says this low amount of inspected OICs is a problem, so they've told the IRS to modernize and put OICs online. This only raises more questions, though. Most importantly, will scammers be able to use this information to further their scammy ways?
So essentially, as it is now, there is an an effective level of privacy with an accepted OIC because even though OICs are available for public inspection, the fact is maybe a handful are reviewed each year. However, the IRS intends to make accepted OICs more easily accessible for the public to examine, so that might change…and we are not entirely sure what type of information will be redacted.
*You can default on an OIC by incurring a new tax debt or not filing a required return 5 years after the date of acceptance. If you do default the entire settled amount come roaring back. And the statute of limitations on collections, even if it would have expired in the 5 years, will restarted where it was at the time the OIC was first processed.
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