In this episode, Amro Badran sits down with Christopher Nichols, Director of Tax Resolution at Badran Tax and a former IRS Collection Revenue Officer and Appeals Settlement Officer, to demystify the Offer in Compromise (OIC) process. They cut through the misleading "settle for pennies on the dollar" advertising and explain the three core collection categories and, crucially, the three different types of OICs. Learn how the IRS calculates your ability to pay, why filing an OIC can sometimes extend your tax collection period, and what you must do to stay in compliance both before and after your offer is accepted.

Key Takeaways:

• OIC Reality Check: Understand that the IRS accepts only about 30% of OICs filed, making pre-submission analysis essential.
• The Three Offer Types: A breakdown of Doubt as to Collectibility (the most common), Doubt as to Liability, and Effective Tax Administration (Hardship) offers.
• Reasonable Collection Potential: How the IRS determines your ability to pay by calculating your monthly income/expenses and the liquidation value of assets like home equity and vehicles.
• Statute of Limitation Risk: The critical warning that filing an OIC freezes and extends the 10-year Collection Statute Expiration Date (CSED).
• Compliance Requirement: The non-negotiable rule is to be in full filing compliance for the last six years prior to submitting the offer and for five years after acceptance.

Episode Highlights and Timestamps:

[00:00:00] - Introduction to Offer in Compromise (OIC) and the three collection categories

[00:03:36] - Offer in Compromise Acceptance Statistics (FY 2023 and FY 2024)

[00:05:07] - The benefit of OIC for the IRS (clearing liabilities from their books)

[00:06:22] - Forms required to file an OIC (Form 433 and Form 656) and the role of net monthly income

[00:07:10] - The three basic types of Offers: Doubt as to Collectibility, Doubt as to Liability, and Effective Tax Administration (ETA)

[00:09:24] - Effective Tax Administration (ETA) and hardship examples (e.g., medical expenses for the elderly)

[00:14:12] - Ideal OIC candidates (people with no ability to pay and no assets)

[00:15:17] - Warning: Filing an OIC freezes the Collection Statute Expiration Date (CSED)

[00:23:00] - Post-acceptance requirement: The 5-year compliance contract (Form 656)

[00:23:38] - Application fees, low-income exemption, and the difference between Lump Sum and Periodic Payment offers

[00:27:44] - Requirements after an OIC is accepted (payments and continuing compliance)

[00:33:04] - The 3-year lookback period for "dissipated assets" (e.g., cashed-in retirement or inheritance money)

[00:35:09] - IRS criteria for high-profile tax cases (high dollar amount, politicians, and professional athletes)

[00:36:44] - The OIC calculation is based on the ability to pay, not the amount owed

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👉 LinkedIn: https://www.linkedin.com/in/christopher-nichols-b1b515355/

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