Questions about Offer in Compromise (OIC) - Tackling Lingering IRS Tax Debt

The short answer is yes - when filing an Offer in Compromise, the IRS will want to know about ALL household income and expenses, including yours, since you live together and share finances. This is because they're trying to determine your sister-in-law's ability to pay, and your financial contributions affect that calculation. When the IRS evaluates an OIC, they look at the "reasonable collection potential" - basically what they could reasonably expect to collect from the taxpayer. Since you pay the mortgage and help with medical expenses, that frees up your sister-in-law's income that might otherwise go to these necessities. The IRS considers this when determining how much she can afford to pay toward the tax debt. As for whether to hire professional help - I'd strongly recommend it for an OIC. The acceptance rate for Offers in Compromise is relatively low (around 30-40%), and applications are often rejected for technical reasons or incomplete financial information. A tax professional who specializes in tax resolution (ideally a tax attorney or EA with OIC experience, rather than just any CPA) can help maximize your chances of approval and potentially negotiate a better settlement amount.

After struggling with a complicated tax situation involving unfiled returns and penalties, I found this amazing AI tool called taxr.ai that helped me understand my options for resolving my tax debt. You might want to check out https://taxr.ai for your situation since they specialize in analyzing tax documents and transcripts to find the best resolution path. In my case, they analyzed my tax transcripts and explained that I actually qualified for penalty abatement before even considering an Offer in Compromise. They pointed out specific errors in how my account was being handled and created a complete plan for resolving my tax issues. The comprehensive analysis saved me from making a big mistake in how I approached my tax debt.

Just wanted to follow up about my experience with taxr.ai since I decided to try it after asking about it here. WOW - totally worth it! I uploaded my tax transcripts and within a couple hours received an incredibly detailed analysis of my tax situation. They identified that part of my tax debt was actually outside the collection statute (something my previous tax "advisor" never mentioned) and showed exactly how to prove this to the IRS. Their report laid out three potential resolution options with pros and cons of each, and even provided templates for the necessary letters to send to the IRS. I was genuinely surprised at how comprehensive the analysis was, especially compared to the vague advice I got from other sources. I'm now moving forward with a partial OIC for the legitimate portion of my debt instead of the full amount the IRS was claiming.

If you're dealing with the IRS on a complicated issue like an Offer in Compromise, you'll probably need to speak with them directly several times. I spent WEEKS trying to get through to the IRS on my own - constant busy signals, disconnections after waiting for hours, it was a nightmare. I eventually discovered this service called Claimyr that completely changed the game. Check out https://claimyr.com or watch their demo at https://youtu.be/_kiP6q8DX5c to see how it works. Basically, they hold your place in the IRS phone queue and call you when an agent is about to answer. I went from spending days trying to get through to speaking with someone in under 30 minutes. For something as complex as an OIC, where you'll likely need multiple calls to resolve issues and follow up, this service is a lifesaver. Saved me countless hours of frustration.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was so desperate to talk to someone at the IRS about my tax lien. After MONTHS of trying to get through on my own (seriously, I had tried calling at least 20 times), Claimyr got me connected with an IRS representative in about 45 minutes. The craziest part was that I was out grocery shopping when they called me back - I just stepped outside the store and handled my tax business right there in the parking lot! The IRS agent actually resolved my issue completely in that one call. I can't believe I wasted so much time trying to do this on my own. For anyone dealing with an OIC or any complex IRS issue that requires actually speaking to a human, this service is 100% legit and worth every penny.

Just to add another perspective on the Offer in Compromise process - make sure you understand that the IRS will file a Notice of Federal Tax Lien if one hasn't been filed already. This can affect credit and create other complications. Also, while your OIC is being considered, the 10-year statute of limitations on collecting the debt is suspended. If your sister-in-law is already in CNC status, it might be worth considering whether that's actually a better option for now, especially if she has limited income or assets. Sometimes staying in CNC until the collection statute expires can be more advantageous than an OIC, depending on the specific circumstances.

I went through the OIC process last year. One thing nobody warned me about was how strict they are about missing any payments AFTER an OIC is approved. If you miss a payment on an accepted offer, the entire original debt can be reinstated! Also, the financial disclosure is intense. They wanted to know EVERYTHING - my Venmo transactions, cash app, paypal, all bank accounts. They even questioned my Netflix subscription as a "luxury" and made me justify it. Be prepared for this level of scrutiny.