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Offer in Compromise (OIC)
Settle your tax debt for less than the full amount owed
What is an Offer in Compromise?
An Offer in Compromise (OIC) allows you to settle your tax debt for less than you owe. The IRS will accept an OIC when the amount offered represents the most they can expect to collect within a reasonable time.
Who Qualifies?
- You cannot pay your full tax debt
- Paying the full amount would create economic hardship
- There's doubt about whether you owe the full amount
- You're current with filing requirements
- You're not in an open bankruptcy proceeding
How Much to Offer
The IRS calculates your minimum offer based on:
- Assets: Equity in property, vehicles, investments
- Future Income: Disposable income × 12 or 24 months
- Formula: Asset value + (monthly disposable income × term)
Required Forms
- Form 656: Offer in Compromise application
- Form 433-A (OIC): Collection Information Statement for individuals
- Application Fee: $205 (waived for low-income taxpayers)
- Initial Payment: 20% for lump sum offers
Payment Options
Lump Sum Cash
- Pay 20% with application
- Pay remainder within 5 months of acceptance
- Lower offer amount accepted
Periodic Payment
- Pay initial payment with application
- Continue payments during IRS review
- Pay remainder within 6-24 months
The OIC Process
- Pre-qualify: Use our financial tools to determine eligibility
- Gather Documentation: Financial records, asset valuations
- Complete Forms: 656 and 433-A with supporting docs
- Submit Offer: Include application fee and initial payment
- IRS Review: Typically 6-12 months for decision
- Acceptance: Make final payments and stay compliant for 5 years
Pros and Cons
Advantages
- Settle for less than full amount
- Fresh start once accepted
- Stops collection actions during review
- Interest and penalties stop accruing
Disadvantages
- Difficult to qualify (IRS accepts ~40%)
- Lengthy process (6-12 months)
- Requires upfront fee and payment
- Must remain compliant for 5 years
Next Steps
If you believe you qualify for an OIC:
- Complete your financial analysis on the Dashboard
- Calculate your reasonable collection potential
- Gather all required documentation
- Complete Forms 656 and 433-A using our tools
Ready to submit an offer? Visit the OIC Program Page to start your application.