Settle your IRS debt for what you can actually pay

An offer in compromise (OIC) is a formal agreement between you and the IRS that settles your tax liability for less than the full amount owed. It is filed on Form 656 with a complete financial disclosure, Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses. Most accepted offers are based on doubt as to collectibility: the IRS agrees the offer amount is the most it can reasonably expect to collect before the collection statute runs out.

The core of every offer is reasonable collection potential (RCP): the equity in your assets plus a multiple of your monthly ability to pay after IRS-allowed living expenses. If your offer is at or above RCP and everything else is in order, the IRS is supposed to accept it. If your offer is below RCP, it gets rejected no matter how well the paperwork is written. That is why we calculate RCP first and let the math decide whether an offer is the right program, or whether an installment agreement or hardship status fits better.

The IRS applies hard eligibility gates before it even evaluates your numbers. To have an offer considered, you must have:

• Filed all required tax returns and made all required estimated tax payments for the current year
• No open bankruptcy proceeding
• If you are an employer, made federal tax deposits for the current quarter and the two preceding quarters

Past those gates, qualification is purely financial. The standard application carries a $205 fee. With a lump sum offer, you send 20 percent of the offer amount with the application and pay the balance in five or fewer payments after acceptance. With a periodic payment offer, you make monthly payments while the IRS reviews it. Taxpayers who meet the IRS low-income certification guidelines skip both the fee and the upfront payments.

Every case starts with investigation, not paperwork. We pull your IRS account transcripts to confirm exactly what is assessed, which years are involved, what penalties and interest have accrued, and where each balance sits on the 10-year collection clock. Then we build your financial picture the way an offer examiner will: income, allowable expenses under the IRS collection financial standards, and asset equity.

Compliance comes next, because the IRS returns offers from non-compliant taxpayers unreviewed. That means any unfiled returns get filed and current-year withholding or estimated payments get fixed first. Only then do we prepare and file the Form 656 package, document every figure, and respond to the offer examiner's requests while it is pending. If an offer is rejected and the numbers support it, appeal rights exist and we use them.

The IRS does not publish a fixed processing time for offers. In practice, review commonly takes several months, and the National Taxpayer Advocate has reported that even complete offers can take a year or more to fully resolve. The two-year deemed-acceptance rule caps the wait.

While your offer is pending, the IRS suspends other collection activity: no new levies against your wages or accounts while it is under review. The IRS may still file a Notice of Federal Tax Lien to protect its position, and the review period suspends the collection statute expiration date, with another 30 days added if the offer is rejected. After acceptance, you must stay compliant with filing and payment for five years, or the settled debt can come back.

Self-employed offers are harder than W-2 offers, and that is exactly where we work. Business income has to be documented and normalized, business assets get valued and argued over, and an operating business raises deposit-compliance questions a wage earner never faces. A founder whose company failed often has the strongest offer profile of all: the income that created the debt is gone, and RCP reflects what you earn now, not what you earned then. We build that case with documentation, because the examiner will not take it on faith.