How Long Does an IRS Offer in Compromise Take: A Comprehensive Guide

An Offer in Compromise (OIC) is a program offered by the Internal Revenue Service (IRS) that allows taxpayers to settle their tax debts for less than the full amount owed. While this might sound like an attractive option for those struggling with tax debt, it’s important to understand the complexities and timelines involved. This article provides an in-depth look into the process, timeline, and essential steps to take if you are considering submitting an OIC.

Understanding the Process

An Offer in Compromise is assessed based on the taxpayer's ability to pay, income, expenses, and asset equity. The IRS considers your unique set of circumstances, and you must meet certain criteria to be eligible. Refer to IRM 5.8.1 for detailed guidance on IRS procedures.

Key Steps in the OIC Process

• Eligibility Check: Use the IRS OIC Pre-Qualifier tool to determine if you meet the initial criteria.
• Form Submission: Complete and submit Form 656, along with necessary documentation and fees.
• IRS Review: The IRS reviews your application, which may involve requesting additional information or clarification.
• Decision: The IRS will approve, reject, or offer a counteroffer.

How Long Does the OIC Process Take?

The timeframe for processing an Offer in Compromise can vary significantly, generally ranging from six months to two years. Key factors influencing the duration include completeness of the application, complexity of the financial situation, and current IRS workload.

Average Timeframes

• Initial Submission Review: It typically takes the IRS 6 to 8 weeks to confirm receipt and start preliminary processing.
• Comprehensive Evaluation: This phase can last between 4 to 24 months, depending on case complexity.
• Final Decision: After evaluation, final decisions are often made within one year, though they can extend further.

For more detailed standards, refer to Offer in Compromise Process page.

Actionable Steps to Expedite Your OIC

1. Ensure Complete Documentation: Double-check that all forms (Form 656 & 433-A(OIC) or 433-B(OIC)) are complete and accurate.
2. Respond Promptly: If the IRS requests additional information, provide it as quickly as possible.
3. Stay Informed: Regularly check the status of your submission through IRS communication channels.
4. Consider Professional Guidance: Engaging a tax advisor can help navigate complexities and potentially expedite the process.

Frequently Asked Questions

• How much does it cost to apply for an OIC?

  The application fee is $205, unless you qualify for a low-income waiver.

• Can I negotiate the offered amount further?

  While rare, the IRS may entertain counteroffers from the taxpayer.

• How does a rejected OIC affect my tax situation?

  A rejected OIC does not relieve you of owed taxes and may accrue further penalties and interest.

• Are all debts eligible for an OIC?

  This program generally applies to outstanding federal taxes, penalties, and interest.

• What happens if the IRS accepts my OIC?

  You must comply with all future tax obligations as a condition of the accepted offer.

• Is hiring a tax professional necessary?

  While not mandatory, professional assistance can be beneficial in complex cases.

Conclusion

While an IRS Offer in Compromise can provide a lifeline for those burdened with tax debt, understanding the process, timeline, and requirements is essential. Patience and preparation are key to success. If you are considering an OIC, start by ensuring you’ve met all eligibility requirements and consider seeking professional help.

For further guidance or assistance, please visit our dashboard for professional help in navigating your tax options.