OIC – What Documents are Needed for an Offer in Compromise?

One of the hardest parts in filing an offer in compromise for many people is the process of getting all of the documents together.  The IRS requires that you submit copies of many documents files including: pay stubs, three months of bank statements, medical bills, three months of utility bills, etc.

Many people do not keep these documents organized in their regular living so gathering these documents during the offer in compromise process can be a real headache.  Because the IRS doesn’t want you to just print out your bank’s online account page showing all of the transactions you may have to go to their local bank branch and request copies of past statements.  You may have to make several stops along the way to get all of the documents that you need.

As you proceed through the offer in compromise process, I would recommend that you begin to get organized.  This will help you in several respects.  First, you need to stay current on your taxes as you move forward out of the tax problems.  The IRS requires that you remain current for five years after the acceptance of an offer in compromise and if you do not they will revoke the offer in compromise and reinstate all of the taxes that had been settled in the offer in compromise.  YUCK!  So staying organized and keeping track of all of your financial records will help you stay on course.

Second, as you progress through the offer in compromise process, the IRS will ask that you update your documents occasionally to make sure you have not had an influx in cash or to answer some questions that they have encountered.  Remember all of the pain and strife you went through gathering these documents the first time?  Save yourself the headache and keep a file with all of the documents you might need during the offer in compromise so you only have to look in one place when the IRS calls and needs more information tomorrow.

List of Documents Necessary for an Offer In Compromise

  • Proof of income for the last three months – this may be pretty easy (like submitting a year-to-date paystub from your employer, or it may be more involved if you have to prepare a profit-and-loss (income) statement if you are self-employed.
  • Bank statements for last three months
  • Statements from insurance company showing any cash value insurance you have. If you have term insurance the declaration page is also helpful because term insurance is an allowable expense, but whole life or insurance with a cash value is looked at like an asset.
  • Information about the real estate you own – appraisals are good if they aren’t too old (less than two years), mortgage statements showing the balance due and payoff information
  • Proof of Household Expenses like rent, mortgage payments, natural gas, power, water, trash collection, etc.
  • Proof of Transportation Expenses like car payments (statement from the lender), gas expenses, public transportation costs, registration, insurance, etc.
  • Proof of Health Care Expenses – insurance premiums, doctor bills that you are actually paying and the receipts showing the payments, pharmacy records showing the medications you have purchased this year and what you have paid, etc.
  • Proof of Court Ordered Payments – you have to provide the court order that orders those payments and proof that you have been making those payments like a canceled check. Example?  If you are paying child support to a former spouse, then you need the court order and the canceled checks or receipts for making those payments.

That is a list of the documents that you will need while you work your offer in compromise.  You can get started gathering those documents now and save time when you are getting ready to submit your offer in compromise.