Tax Resolution

Offer in Compromise (OIC)

Settle Your Tax Debt for Less Than You Owe

An Offer in Compromise allows qualifying taxpayers to settle their tax debt for less than the full amount owed. Our acceptance rates exceed industry averages because we ensure every submission meets IRS viability standards before filing—including verification that the offer exceeds Reasonable Collection Potential.

AI Summary

An Offer in Compromise (OIC) is an IRS program that allows eligible taxpayers to settle their tax debt for less than the full amount owed. Qualification is based on "Reasonable Collection Potential" — the IRS's estimate of what it could realistically collect from you.

Could You Qualify for OIC?

Many taxpayers settle for pennies on the dollar

$50,000+

Average Tax Debt Settled

70%+

Average Settlement Reduction

6-12 mo

Typical Resolution Time

Book a Case Analysis Estimate Resolution Fees

Real Results: Client Success Story

Tax Debt Owed

$127,000

Settlement Amount

$14,500

Savings

$112,500

89% Reduction

"Small business owner with $127K in back taxes from failed venture. After documenting limited assets, modest income, and calculating RCP, we secured acceptance of a $14,500 lump-sum offer. Client saved over $112,000 and got a fresh start."

*Illustrative scenario. Results vary based on individual circumstances including income, assets, and compliance history. Past outcomes do not guarantee future results. IRS acceptance of OIC depends on Reasonable Collection Potential analysis.

Do You Qualify? Quick Self-Assessment

You may be a good candidate for an Offer in Compromise if:

You owe more than you could pay in 5-10 years

Your income has decreased significantly

You have limited equity in assets (home, car, savings)

You've experienced hardship (job loss, medical, divorce)

You're current on tax filings (or can get current)

You're not currently in bankruptcy

Check 3 or more? You may qualify for significant debt reduction. Schedule a free evaluation to calculate your potential settlement amount.

How the IRS Calculates Your Offer

The IRS uses your Reasonable Collection Potential (RCP) to determine the minimum offer they will accept. Your offer must equal or exceed your RCP.

RCP=Net Realizable Asset Value+Future Income (monthly disposable × multiplier)

Assets

Quick-sale value of bank accounts, investments, equity in home, vehicles, and other property — minus exemptions.

Future Income

Monthly disposable income (gross income minus IRS-allowed expenses) multiplied by 12 or 24 months depending on payment type.

A lower RCP means a lower minimum offer. A tax professional can legitimately reduce your RCP by documenting allowable expenses, identifying exempt assets, and structuring the offer correctly.

How to Apply for an Offer in Compromise

Form 656

The official Offer in Compromise application. Specifies the offer amount, payment terms (lump-sum or periodic), and grounds for the offer.

Form 433-A(OIC)

Collection Information Statement for individuals and self-employed. Documents income, expenses, assets, and liabilities used to calculate RCP.

Application Fee

A $205 application fee is required unless you qualify for the low-income waiver (income at or below 250% of federal poverty guidelines).

Waived for low-income

Three Types of Offer in Compromise

Most Common

Doubt as to Collectability (DATC)

When the taxpayer's assets and income are insufficient to pay the full liability before the Collection Statute Expiration Date (CSED). We calculate Reasonable Collection Potential (RCP) using IRS formulas to demonstrate why a reduced settlement is appropriate.

Assets insufficient to pay full liability
Income cannot satisfy debt before CSED
RCP calculation supports reduced offer

Dispute Basis

Doubt as to Liability (DATL)

When there is genuine dispute that the assessed tax liability is correct. This requires demonstrating a reasonable basis for doubting the accuracy of the assessment.

Assessment may be incorrect
Reasonable basis for dispute
Documentation supports position

Special Circumstances

Effective Tax Administration (ETA)

When collection would create economic hardship or would be inequitable based on exceptional circumstances—even if the taxpayer could technically pay. This provision exists for situations where enforcing the law would defeat the purpose of the law.

Collection creates hardship
Exceptional circumstances exist
Equity considerations apply

Our OIC Package Includes

Form 656

Offer in Compromise application

Form 433-A (OIC)

Collection Information Statement for Individuals

Form 433-B (OIC)

Collection Information Statement for Businesses

Financial Documentation

Detailed supporting schedules and narratives

OIC Payment Types

Lower Minimum Offer

Lump-Sum Cash Offer

Paid in 5 or fewer installments within 5 months of acceptance. Because the IRS receives full payment quickly, they use a 12-month multiplier to calculate your future income component — which typically results in a lower required offer amount.

Future income × 12 months (lower multiplier)
20% down payment required with submission
Balance due within 5 months of acceptance

More Flexibility

Periodic Payment Offer

Paid in 6 or more monthly installments within 24 months of acceptance. This option provides more flexibility but uses a 24-month multiplier for future income — meaning the required offer amount is typically higher than a lump-sum offer.

Future income × 24 months (higher multiplier)
First monthly payment due with submission
Payments continue while IRS reviews the offer

Key Insight: The IRS does not approve OICs based on negotiation or sympathy. Approval is based strictly on RCP. Choosing the right payment type — and correctly calculating allowable expenses — is the most important factor in getting your offer accepted.

OIC Process Timeline

Initial Consultation & Eligibility Review

We review your full financial picture, pull IRS transcripts, and calculate your RCP to determine if an OIC is viable before spending money on preparation.

Financial Documentation

Gather bank statements, pay stubs, asset documentation, lease/mortgage statements, and monthly expense records needed for Form 433-A(OIC) or 433-B(OIC).

Offer Preparation & Review

We prepare Form 656 and the Collection Information Statement, calculate the minimum viable offer, and review every line for accuracy before submission.

Submission & Application Fee

Submit to the IRS with the $205 application fee (waived for low-income applicants) and the first payment (20% for lump-sum or first monthly installment for periodic).

IRS Review Period (Avg. 6–12 months)

An IRS offer examiner reviews your financial data, may request additional documentation, and calculates their own RCP. The collection statute is tolled during this period.

Acceptance or Rejection

If accepted, pay remaining balance per terms. If rejected, you have 30 days to appeal. We track every stage and respond to IRS requests promptly.

Compliance Monitoring

After acceptance, you must remain in full compliance (file all returns, pay all taxes on time) for 5 years or the IRS can default and reinstate the original debt.

Common Reasons OICs Are Rejected

Offer Below RCP

The most common rejection. If the IRS calculates your RCP at $40,000 but you offer $15,000, they will reject the offer. Accurate RCP calculation is critical.

Incomplete Application

Missing financial documentation, unsigned forms, or omitted assets and income sources cause automatic returns. Returned offers are not rejected — but must be resubmitted.

Non-Compliance at Time of Submission

You must have all required returns filed and be current on estimated tax payments or withholding. Missing returns result in automatic return of the offer.

Active Bankruptcy

OICs cannot be submitted or processed while a bankruptcy case is pending. The offer will be returned without consideration.

Incomplete or Incorrect Forms 433

Errors in income, expense, or asset reporting on the Collection Information Statement cause rejections. IRS examiners verify every line against third-party records.

Failure to Pay Application Fee

The $205 application fee must be included (or a fee waiver attached). Offers submitted without payment and without a waiver claim will be returned.

Professional Standards & Authority

IRC § 7122

Compromises

Authorizes the Secretary to compromise any civil tax liability

Treas. Reg. § 301.7122-1

Offer in Compromise Regulations

Detailed requirements for OIC submissions and evaluation

IRM 5.8

Offer in Compromise

Complete IRS procedures for evaluating and processing OICs

IRM 5.8.4.3

Doubt as to Collectability

Standards for DATC determinations and RCP calculations

IRM 5.8.11

Effective Tax Administration

ETA hardship and equity evaluation criteria

Form 656 Booklet

Offer in Compromise Package

Official IRS forms and instructions

Ready to Settle Your Tax Debt?

Schedule a free consultation to determine if you qualify for an Offer in Compromise. Our team has helped clients settle millions in tax debt for a fraction of what they owed.

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