Offer in Compromise.

What an offer in compromise is

An offer in compromise (OIC) is an agreement with the IRS to settle a tax debt for less than the full amount owed. The IRS generally accepts an offer when it is the most it can expect to collect within a reasonable period, based on your income, expenses and the value of your assets (often called reasonable collection potential).

Offers can also be based on doubt as to liability (you dispute that the tax is owed, filed on Form 656-L) or, less often, on effective tax administration where collecting in full would create economic hardship or be unfair. Most offers are based on doubt as to collectibility.

Who may qualify

• You have filed all required tax returns and made required estimated payments for the current year.
• You are not in an open bankruptcy proceeding.
• Your realistic ability to pay, after allowable living expenses, is less than what you owe.
• Business owners with employees are current on federal tax deposits for the current quarter.

The IRS has an online Offer in Compromise Pre-Qualifier tool. It is a useful first check, but the final decision depends on full financial disclosure.

What the application involves

• Form 656 (included in the Form 656-B booklet) with Form 433-A (OIC) for individuals or 433-B (OIC) for businesses, and supporting documents.
• A nonrefundable application fee and an initial payment, unless you qualify for the low-income certification, which waives both. The current amounts are on the IRS page linked below.
• For a lump-sum offer, a 20% payment generally goes with the application; for a periodic payment offer, you keep paying monthly while the IRS reviews it.
• If accepted, you must file and pay on time for five years, and the IRS keeps refunds for the year it accepts the offer and earlier years.

Timeline

IRS review usually takes many months. While an offer is pending, the IRS generally does not levy for the debt in the offer, but interest continues and a federal tax lien may still be filed. If the IRS has not decided an offer within 24 months of receiving it, the law treats it as accepted, although the time an appeal is pending does not count toward this.

When an offer is not the right fit

If you can pay the balance over time, the IRS will generally expect a payment plan instead, and an offer is likely to be returned or rejected. Penalty relief, a payment plan or currently-not-collectible status is often more realistic. We will tell you plainly if an offer is unlikely to work, before you spend money on it.

Documents to gather

• Recent pay stubs or business profit-and-loss statements
• Several months of bank statements for every account
• Monthly expense records: housing, utilities, vehicles, health care, child care
• Statements for retirement accounts, investments and life insurance with cash value
• Vehicle loans, mortgage statements and property values
• All IRS notices

Please don’t send Social Security numbers, bank details or tax documents through the website chat or forms. We’ll arrange a secure way to share them.

How fees work

We quote a flat fee after the free consultation, once we know what the work involves, and agree the scope with you before any work starts. Amounts owed to the agency, and any agency fees, are paid to the agency, not to us. No one can promise a particular result: the agency decides, and our job is to present your case accurately and on time.

Frequently asked questions

Official sources

• IRS: Offer in compromise
• IRS Tax Topic 204, Offers in compromise
• IRS Publication 594, The IRS Collection Process
• IRS Publication 1660, Collection Appeal Rights

Last updated November 13, 2026 · General information, not tax or legal advice. Read the disclaimer.