The basic idea
Settling for less than the full balance
An Offer in Compromise (OIC) is a formal agreement in which the IRS accepts less than the full amount owed to resolve a tax debt. It isn't a discount everyone qualifies for — the IRS generally only accepts an offer at or above what it calculates it could otherwise collect from you.
That's why an honest, upfront financial review matters more than the paperwork itself — it tells you whether an offer is realistic before you invest time in the application.
The process
How an Offer in Compromise moves forward
1. Confirm you're eligible
You must be current on all required filings, not in an open bankruptcy, and have made any required current-year estimated payments.
2. Calculate your Reasonable Collection Potential
The IRS estimates what it could realistically collect from your income and equity in assets before the collection period runs out — that figure generally drives the minimum acceptable offer.
3. File Form 656 and Form 433-A (OIC)
The formal offer package includes your financial disclosure, supporting documents, the application fee, and an initial payment tied to the payment option you choose.
4. The IRS reviews — and may negotiate
Review commonly takes several months. The IRS may request more documentation or counter with a different number before accepting, and can reject offers that don't meet the RCP standard.
Free case review
You don't have to face the agencies alone.
Start with a free, confidential case review. A specialist will look at your notice and explain your options — with no obligation.