Offer in Compromise – The Best Way To Reduce Your Tax Debt

What is an Offer in Compromise?

An Offer in Compromise is one of the best IRS tax relief programs to date. Why? Because unlike the other Fresh Start programs, it really does reduce your tax debt. For some, it can reduce your owed amount by more than 90 percent!

Tax professional helps client

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed.


The Offer In Compromise program gives true relief to any qualifying taxpayer and the IRS still receives a portion of what’s owed. It’s a win-win to all parties.  

Currently Not Collectible vs Offer in Compromise

To qualify for both the currently not collectible and offer in compromise program, you must have  financial hardship or be on the verge of financial hardship. Your tax debt must greatly surpass your income. In some cases, if you qualify for a CNC, you may also qualify for an offer in compromise.

Eligibility for Offer in Compromise

You must meet these requirements to be considered for an Offer in Compromise. 
  • Filed all required tax returns and made all required estimated payments
  • Aren’t in an open bankruptcy proceeding
  • Have a valid extension for a current year return (if applying for the current year)
  • Are an employer and made tax deposits for the current and past 2 quarters before you apply

If you apply for the program even if you are not eligible, the IRS will return your application and the application fee. Any offer you presented to the IRS will be taken as a payment towards your unpaid tax balance.
Currently Not Collectible Tax Relief

Offer in Compromise Payment Options

Lump Sum Cash Offer

The lump sum cash payment offer is defined by the IRS as an offer that can be paid in five or fewer payments within a 5 or fewer months time frame after the IRS accepts the offer.

Basically, if you pay a nonrefundable 20 percent lump sum payment, you have 5 months to pay off the reduced amount, that is, if  the IRS accepts your offer. If the offer is rejected, the 20 percent payment still goes towards your tax liability.

Periodic Payment Offer

The periodic payment offer gives you a longer timeframe to pay off the reduced amount. Your offer must be payable in 6 or more monthly payments and within 24 months after the offer is accepted. 

When you make your offer, you must submit your first proposed payment and your application fee. The first payment, accepted or rejected, is nonrefundable and will go towards your tax liability.

What to Expect from an Offer in Compromise

Even though you’re paying less than what you owe the IRS, once the IRS accepts your application, you’ll make your monthly payments until you pay off the agreed amount. Unlike the Currently Not Collectible, you won’t need to prove to the IRS you’re unable to pay your full debt with an Offer in Compromise. Your OIC agreement allows you to treat that reduced amount like it’s your actual debt. 

The OIC process takes, on average, about 6 months. The more accurate your personal and financial information on your application, the faster the IRS can determine your eligibility for an OIC. This is why it is recommended that you collaborate with a tax professional. 

A tax professional answers your questions, completes your forms, and gives you a list of everything they need to streamline your application. 

Once you’ve paid off your Offer in Compromise, you’re debt-free!

What if My Offer in Compromise Application is Rejected?

Offer in Compromise Rejection

The low acceptance rate makes rejection a possibility, but it’s not the end of your tax relief journey.

There are so many different exceptions, rules, and regulations to an Offer in Compromise. Don’t make the mistake of filing the wrong paperwork, paying the wrong amount, or worse, paying MORE than what you should be. That’d be a tragic waste of money and time.

If your OIC is rejected, you have 30 days from the day of the rejection letter to request an appeal. 

The IRS mails you a list of reasons why you were rejected and what your income, expenses, and assets/equity were at the time of rejection. The appeal requires you to submit reasons why you don’t agree with the IRS decision. 

It’s integral that a tax professional works with you resolve your appeal process. The IRS won’t accept “I can’t pay” or “special circumstances prevent me from paying” when you needed to explain that in your application form. 

You must go line by line in the worksheets the IRS sends you and explain how it pertains to your financial situation. A tax professional will do the appeal process and speak with the IRS agent who determined your eligibility.

There are several reasons your OIC was rejected and sometimes it’s not your fault.

  • Paperwork filed incorrectly
  • Application fee wasn’t included (unless you qualify for Low Income)
  • IRS Administrative error
  • Future earnings were incorrect
  • Expenses/Income ratio were miscalculated 

The IRS makes many mistakes. They deal with millions of cases per year and clerical errors are common. When you’re making an appeal with your tax professional, you can find these errors – from your side or theirs – and create a plan to correct them. You only have 30 days to appeal, so act fast, efficiently, and accurately to receive the relief you deserve.

Simplify The Application Process and Everything Else After

There are so many different exceptions, rules, and regulations to an Offer in Compromise. Don’t make the mistake of filing the wrong paperwork, paying the wrong amount, or worse, paying MORE than what you should be. That’d be a tragic waste of money and time.

The IRS will always try to take the most that they can from you. They may reduce your owed amount, but a tax professional can negotiate with them to cut the liability down even further. We will help you navigate through the scary world of tax debt and represent you while you’re filled with uncertainty.

Very few taxpayers know they have the right to dispute their tax debt. Even fewer know that programs exist to eliminate or reduce their tax debt. 

An Offer in Compromise is a delicate navigation of ‘please’ and ‘thank you’s with the IRS. The process requires an insane amount of attention to detail and you need someone to fight for your right to dispute your tax debt. Act now to erase your debt and live freer.

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