IRS Offer in Compromise

This may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances in determining your eligibilty:

  • Ability to pay;
  • Income;
  • Expenses; and
  • Asset equity.

They generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. The Offer in Compromise program is not for everyone. If you you hire a tax professional  to help you file an offer, be sure to check his or her qualifications.

Make sure you are eligible

Before they can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding.

Submit your offer

  • Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms;
  • Form 656(s) – individual and business tax debt (Corporation/ LLC/ Partnership) must be submitted on separate Form 656;
  • $186 application fee (can be waived in certain cases); and
  • Initial payment (can be waived in certain cases) for each Form 656.

Select a payment option

Your initial payment will vary based on your offer and the payment option you choose:

  • Lump Sum Cash: Submit an initial payment of 20 percent of the total offer amount with your application. Wait for written acceptance, then pay the remaining balance of the offer in five or fewer payments.
  • Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If accepted, continue to pay monthly until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer.

Understand the process

While your offer is being evaluated:

  • Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
  • A Notice of Federal Tax Lien may be filed;
  • Other collection activities are suspended;
  • The legal assessment and collection period is extended;
  • Make all required payments associated with your offer;
  • You are not required to make payments on an existing installment agreement; and
  • Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.