Offers in Compromise

An Offer in Compromise could be just the Solution you need. Find out today.
Maybe you didn’t know that the IRS has an Offer in Compromise program that can be utilized by the tax payer when liability has been incorrectly assessed or when total liability is more than you can afford to pay.

When presented correctly to the IRS, this might mean your tax liability is entirely eliminated for as little as 5-15% of the total amount.

Our experienced tax specialists can help you determine if you might qualify for an Offer in Compromise, or if a tax payment plan would be the better route for you to go.

Fill out the form at the bottom of this page for a FREE Consultation if you need help solving your tax problems.

Frequently Asked Questions - Offer in Compromise

What is an Offer in Compromise?

An Offer in Compromise (OIC) is a formal agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed.

Authority: Internal Revenue Code (IRC) § 7122.

The IRS may accept an offer when it determines that:

  • Full collection is unlikely, or

  • Collecting the full amount would create economic hardship, or

  • There is doubt as to liability.

What are the three types of OIC?
1. Doubt as to Collectibility (DATC)

The most common type.
Approved when the taxpayer’s assets and income are insufficient to fully pay the liability within the collection statute period.

2. Doubt as to Liability (DATL)

Applies when there is a genuine dispute about whether the tax is legally owed.

3. Effective Tax Administration (ETA)

Applies when the tax is legally owed and collectible, but requiring full payment would create economic hardship or be inequitable.

How does the IRS determine if I qualify?

For collectibility-based offers, the IRS evaluates:

  • Equity in assets

  • Bank accounts

  • Real property

  • Retirement accounts

  • Vehicles

  • Monthly disposable income

The IRS calculates Reasonable Collection Potential (RCP), which generally equals:

Net realizable equity in assets + projected future disposable income

If the offer equals or exceeds RCP, acceptance is more likely.

What financial forms are required?

Most individuals must submit:

  • Form 656 (Offer in Compromise)

  • Form 433-A (OIC) – Financial disclosure

  • Supporting documentation (bank statements, pay stubs, asset statements, etc.)

Businesses use Form 433-B (OIC).

What payment options are available?
Lump Sum Offer

  • 20% initial payment submitted with application.

  • Remaining balance paid within five months of acceptance.

Periodic Payment Offer

  • First proposed installment submitted with application.

  • Continued monthly payments during review.

  • Balance paid within 24 months of acceptance.

All payments are non-refundable if the offer is rejected.

What happens if my offer is accepted?

If accepted:

  • You must comply with all filing and payment requirements for five years.

  • Any refunds due during the calendar year of acceptance are applied to the debt.

  • Defaulting reinstates the full original liability, minus payments made.

Strict compliance is mandatory.

What happens if my offer is rejected?

If rejected:

  • You have 30 days to appeal.

  • Appeals are handled by the IRS Independent Office of Appeals.

  • Collection activity may resume if no appeal is filed.

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