Offer in Compromise

Offer in Compromise for 1099 Contractors

Getting paid on 1099s means no taxes are withheld—and it's easy to fall behind. An Offer in Compromise could help you settle for less.

Check If You Qualify

Why 1099 Contractors Face Tax Problems

Unlike W-2 employees, 1099 contractors receive their full payment with no taxes withheld. This feels great until tax time when you realize you owe thousands you didn't set aside. Add the 15.3% self-employment tax on top of income tax, and many contractors find themselves in serious debt.

The good news? An Offer in Compromise lets you settle your tax debt for less than you owe. The IRS looks at your Reasonable Collection Potential (RCP)—what they think they can realistically collect from you based on your income, expenses, and assets.

Common Tax Issues for 1099 Contractors

No Withholding

Without automatic tax withholding, it's up to you to set money aside—and most don't set aside enough.

Estimated Tax Penalties

Not making quarterly payments? Penalties add up fast, sometimes 10-15% of your debt.

Surprise Tax Bills

That first year as a 1099 often brings a shocking tax bill that creates instant debt.

Multiple Clients

Income from various sources makes tracking and planning more complex.

How Offer in Compromise Works for 1099 Contractors

OIC Advantages for 1099 Contractors:

  • Variable income can lower your "future income" calculation
  • Business expenses reduce your disposable income
  • Equipment and tools may have minimal equity value
  • Economic downturns in your industry support hardship claims
  • Settle for a fraction of what you owe

What You'll Need:

  • All tax returns filed (we can help with this)
  • Current on estimated tax payments
  • Detailed income and expense documentation
  • Financial records for the past 12 months
  • $205 application fee + 20% of offer amount

Other Options for 1099 Contractors Tax Debt

Installment Agreement

If you don't qualify for an OIC, a payment plan lets you pay your full debt over time in manageable monthly amounts.

  • Stops collection actions
  • Predictable payments
  • Easier to qualify

Currently Not Collectible

If you can't afford any payments right now, CNC status pauses collections until your situation improves.

  • No payments required
  • Collections paused
  • Time to stabilize

Penalty Abatement

If this is your first tax issue or you have reasonable cause, you may qualify to have penalties removed.

  • Reduce total owed
  • First-time relief available
  • Reasonable cause options

Not sure which option is best? Compare OIC vs Installment Agreement

Ready to Resolve Your Tax Situation?

Take our free 2-minute assessment to understand your options.

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