OFFER IN COMPROMISE
If you are planning to settle your tax debt for less than you owe, Form 433-A (OIC) is the most important form in the process. It is the IRS’s financial x-ray. Every number you put on it runs through a formula that decides whether your Offer in Compromise gets accepted or rejected.
The stakes are real. In 2024, the IRS accepted only about 21% of Offer in Compromise applications. That means roughly 4 out of 5 were turned down. The biggest reasons for rejection are not complicated cases or unusual financials. They are mistakes on Form 433-A (OIC) that any taxpayer can make when filling it out alone.
This guide walks through what Form 433-A (OIC) is, what the IRS is actually looking at, and where the decisions that change your outcome get made.
Quick AnswerForm 433-A (OIC) is the IRS financial disclosure required for every individual or self-employed Offer in Compromise application. The IRS uses it to calculate Reasonable Collection Potential, the minimum settlement amount they will accept.
The IRS accepted 21.4% of OIC applications in 2024. Most rejections are not people who don’t qualify. They are people who qualify but made errors on Form 433-A (OIC): missing documentation, asset undervaluation the IRS can disprove, expense claims above standards without proof, or an offer amount below the calculated RCP.
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What Is Form 433-A (OIC)?
Form 433-A (OIC), formally called the Collection Information Statement for Wage Earners and Self-Employed Individuals, is the financial disclosure you submit when you apply for an Offer in Compromise. An Offer in Compromise lets you settle IRS tax debt for less than the full amount you owe.
The form gives the IRS a complete picture of your financial situation: what you earn, what you spend, what you own, and what you owe. The IRS uses that picture to decide two things. First, whether you qualify for an OIC at all. Second, the minimum amount they will accept as a settlement.
ImportantThe current revision is Rev. 4-2026. Submit an older version of the form and the IRS returns the entire OIC package without review. You can download the current version directly from IRS.gov.
Form 433-A (OIC) vs. Form 433-B vs. Form 433-F
There are four related forms in the 433 family. The one the IRS wants depends on what you are applying for and who you are.
Form 433-A
Used when you owe the IRS and you are asking for an installment agreement, Currently Not Collectible status, or responding to a Revenue Officer’s financial inquiry. It focuses on your ability to make payments over time.
Form 433-A (OIC)
Used only for Offer in Compromise applications submitted on Form 656. This version is tailored to calculating the lowest amount the IRS will accept as a settlement. The math on this form is different from the standard 433-A in one important way: it uses Quick Sale Value to price your assets instead of full fair market value.
Form 433-B and Form 433-B (OIC)
Both are for businesses. Use Form 433-B for an installment agreement or Currently Not Collectible status. Use Form 433-B (OIC) for a business Offer in Compromise. Sole proprietors and single-member LLCs reporting on Schedule C report their business information directly on Form 433-A or Form 433-A (OIC), not on Form 433-B.
Form 433-F
A shorter version the IRS sometimes asks for when your case is simpler or the balance is smaller. If a Revenue Officer is assigned to your case, expect Form 433-A instead.
| Form | When to Use | Who Files | Key Focus |
|---|---|---|---|
| Form 433-A | Installment agreement, Currently Not Collectible | Individuals, self-employed | Monthly payment capacity |
| Form 433-A (OIC) | Offer in Compromise | Individuals, self-employed | Settlement amount (uses Quick Sale Value) |
| Form 433-B | Installment agreement, Currently Not Collectible | Businesses (not sole props) | Business payment capacity |
| Form 433-B (OIC) | Business Offer in Compromise | Businesses (not sole props) | Business settlement amount |
| Form 433-F | Simpler cases, smaller balances | Individuals | Streamlined financial snapshot |
Who Has to File Form 433-A (OIC)
You need to file Form 433-A (OIC) if you want to settle your IRS tax debt through an Offer in Compromise, are an individual or self-employed taxpayer (including sole proprietors and single-member LLCs reporting on Schedule C), have already filed all required tax returns, and are not currently in bankruptcy.
The IRS will not process your OIC application without it. Even if you mail in Form 656 and the $205 application fee, the IRS will send the package back if Form 433-A (OIC) is missing or incomplete.
If your issue is that you dispute whether the tax was assessed correctly, not that you cannot pay it, you use Form 656-L instead and skip Form 433-A (OIC) entirely. If you have unfiled returns, those need to be filed first.
How the IRS Uses Form 433-A (OIC) to Decide Your Offer
This is the part most taxpayers miss. The IRS does not negotiate. They calculate.
Once you submit Form 433-A (OIC), an Offer Examiner plugs your numbers into a formula called Reasonable Collection Potential (RCP). RCP is the IRS’s estimate of the maximum amount they believe they could collect from you over a set period of time.
The RCP formula is: Net Asset Value + (Monthly Disposable Income × Payment Multiplier)
- Lump-sum cash offer: multiply by 12
- Periodic payment offer: multiply by 24
Your offer must equal or exceed your RCP. If you offer less, the IRS will reject the offer or send a counteroffer set at the RCP figure.
A Quick Example
Say you owe $80,000 in back taxes. Your assets are worth $15,000 in Quick Sale Value after subtracting loans. Your monthly disposable income is $400.
- If you offer a lump sum, the IRS will expect at least: $15,000 + ($400 × 12) = $19,800
- If you propose periodic payments, it becomes: $15,000 + ($400 × 24) = $24,600
An offer below those numbers will likely be rejected.
Where the RCP Math Actually Gets Decided
The formula looks fixed. It is not. Three inputs are flexible, and that is where most cases get won or lost: how your assets are valued (the 80% Quick Sale Value rule is a starting point, not a ceiling or floor), how your monthly income is documented (self-employed income fluctuates, and the IRS looks at averages. A single high-income month can inflate your disposable income without context and lock in an unfavorable number), and which expenses the IRS allows. The Collection Financial Standards cap many expense categories, but documented exceptions exist.
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Walking Through Each Section of Form 433-A (OIC)
Form 433-A (OIC) has seven sections spread across eight pages. Each one requires documentation to back up what you report. The IRS will verify your answers against bank records, tax returns, public records, and third-party data sources.
Section 1: Personal and Household Information
Legal name, Social Security number, date of birth, address, marital status, and all dependents living in the household. Household size directly affects which Collection Financial Standards apply to your expenses, so list every dependent.
Section 2: Employment Information
Your employer’s name, address, and how long you have worked there. If you have changed jobs recently, explain the gap. Inconsistencies between your reported income and what the IRS pulls from W-2s and third-party reports will trigger questions.
Section 3: Personal Asset Information
This is the most document-heavy section. You report bank accounts (checking, savings, money market) with current balances, investment accounts (stocks, bonds, mutual funds), retirement accounts (401(k), IRA, pension), life insurance policies with cash value (term life has no cash value and is not reported as an asset), real estate with fair market value and mortgage balances, vehicles with current value and loan balances, and other personal property over certain thresholds.
You must attach three months of statements for every financial account listed. Missing statements is one of the top reasons applications get returned without review.
Section 4: Self-Employed Information
If you are self-employed, a sole proprietor, or report business income on Schedule C, you fill out this section. Business name, industry, start date, and how you operate.
Section 5: Business Asset Information
Business bank accounts, accounts receivable, equipment, inventory, and any other business property. Each asset gets valued at Quick Sale Value minus any loans against it.
Section 6: Monthly Household Income and Expenses
This is where the IRS calculates your disposable income. Every source of income and every monthly expense. The IRS compares your expenses against the Collection Financial Standards and caps what you can claim in several categories.
Section 7: Calculating Your Minimum Offer
The IRS walks you through the RCP formula using the numbers from Sections 3 through 6. Your completed calculation becomes the floor your offer must meet or exceed.
How the IRS Values Your Assets (Quick Sale Value Explained)
When the IRS calculates what your assets are worth for an OIC, they do not use retail value or Zillow value. They use Quick Sale Value (QSV), defined in IRM 5.8.5 as an estimate of the price a seller could get for the asset if they had to sell in a short period of time, usually 90 calendar days or less.
The default rule is Quick Sale Value = 80% of Fair Market Value. The IRS can go higher or lower depending on market conditions and the asset type.
Asset Valuation on Form 433-A (OIC)
| Asset | Starting Value | IRS Discount | What Gets Subtracted | Equity Counted |
|---|---|---|---|---|
| Cash in bank | Full balance | None | None | Full balance |
| Real estate | Fair market value | 80% (QSV) | Mortgage balance | QSV minus mortgage |
| Vehicles | Private-party value | 80% (QSV) | Loan balance | QSV minus loan |
| Stocks, mutual funds | Current market value | 80% (QSV) | None | QSV |
| Retirement accounts (401k, IRA) | Current balance | 80% (QSV) | Early withdrawal taxes and penalties | QSV minus taxes/penalties |
| Business assets | Replacement cost or FMV | 80% (QSV) | Loans against assets | QSV minus loans |
A Real Valuation Example: Home Equity
You own a home worth $400,000 with a $280,000 mortgage. Fair Market Value: $400,000. Quick Sale Value (80%): $320,000. Minus mortgage: $280,000. Equity the IRS counts: $40,000.
A Real Valuation Example: Traditional IRA
Your traditional IRA holds $50,000. You are under 59 and a half, so you would pay a 10% early withdrawal penalty plus federal tax (assume 22%) if you pulled it out. Starting balance: $50,000. QSV at 80%: $40,000. Minus 10% penalty on withdrawal: $4,000. Minus 22% federal tax on withdrawal: $8,800. Equity counted: $27,200.
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How the IRS Evaluates Income and Expenses
Your monthly disposable income on Form 433-A (OIC) is not your budget. It is what the IRS says you have left after allowing certain expenses. The IRS uses Collection Financial Standards to determine which expenses are allowable and at what amounts.
National Standards
Fixed amounts for food, clothing, personal care, and miscellaneous household expenses. The IRS publishes these amounts annually. You get the standard amount regardless of what you actually spend, which means if you spend less, your allowable expense is still the standard.
Local Standards
Housing and utilities vary by county and family size. Transportation operating costs vary by metropolitan region. The IRS publishes both on IRS.gov. For these two categories, the rule is: actual expenses or the standard amount, whichever is lower, unless you can document why higher is necessary.
When You Can Argue Above the Standard
The IRS can allow expenses above the standards if you can show they are necessary for health and welfare (serious medical needs, court-ordered payments) or production of income (equipment, travel, licenses required for work). The six-year rule also allows above-standard expenses if you can full-pay the entire tax liability, including penalties and interest, within six years.
Expenses that almost always get disallowed: private school tuition (unless there is a documented special medical need), credit card minimum payments (the miscellaneous allowance is meant to cover these), gym memberships, pet care beyond basic food, and vacation savings and discretionary travel.
Documents You Need to Submit With Form 433-A (OIC)
The IRS verifies every number. If the documentation is not attached, expect a request for more information or a returned package. The full documentation list includes most recent three pay stubs (or equivalent if self-employed), three months of bank statements for every account listed, most recent brokerage and investment account statements, most recent retirement account statements, vehicle registration and loan payoff statement, mortgage statement and most recent property tax bill, court orders for alimony or child support, medical expense documentation if you are claiming above-standard healthcare, profit and loss statement (if self-employed) for the last three months, and most recent filed tax return.
Package everything organized by form section. Revenue Officers and Offer Examiners appreciate submissions they can review without requesting more.
Where to Mail Form 433-A (OIC) and What Happens Next
You submit Form 433-A (OIC) as part of the complete OIC package, which includes Form 656 (Offer in Compromise), Form 433-A (OIC) with all supporting documents, the $205 application fee (waived if you qualify for low-income certification), and the initial payment (the amount depends on your payment option).
The mailing address is listed on Form 656-B. You can also submit the package through your Individual Online Account on IRS.gov.
What Happens After You File
Once your package arrives, the IRS does an initial processing check. If anything is missing, they return the package and your application fee. If it is complete, they assign an Offer Examiner and send you a letter with an estimated contact date. Most OIC applications take 6 to 12 months to get a decision. Complex cases can take longer. During the review, collections are paused. If the IRS does not make a determination within two years of receiving your complete package, the offer is automatically accepted.
Why Form 433-A (OIC) Applications Get Rejected
In 2024, the IRS received 33,591 OIC applications and accepted 7,199, a 21.4% acceptance rate. The 79% that got rejected were not mostly people who did not qualify. Most were people who qualified but filled out Form 433-A (OIC) in ways that hurt their own case.
The most common rejection reasons:
- Missing documentation. The IRS does not chase down supporting documents. If the package is incomplete, it comes back.
- Income reported as a single high month. Self-employed applicants sometimes average their income incorrectly, reporting one strong month as representative of their earnings. The IRS looks at a 12-month average and adjusts accordingly.
- Expenses claimed without documentation. Above-standard expense claims without attached proof get disallowed automatically.
- Asset undervaluation the IRS can easily disprove. If you value your car at $3,000 and Kelley Blue Book lists the private-party value at $11,000, the IRS adjusts. Overly aggressive valuations get caught.
- Asset omission. The IRS cross-references your return against W-2s, 1099s, bank interest reports, and real estate records. Assets you did not list tend to surface anyway, and the application gets returned for lack of candor.
- Expenses claimed above standards without documentation. If you report $2,200 in monthly housing but the local standard for your county is $1,400, you need proof that the $800 excess is necessary. Claiming it without documentation just lowers your disposable income on paper, and the IRS adjusts it back.
- Offer amount below RCP. Many applicants submit an amount they think seems fair without doing the RCP calculation. The IRS will reject or counter any offer below RCP.
Facing a rejection, or preparing your first offer?
An honest look at the math before you resubmit changes the outcome. If the numbers don’t support an OIC, we tell you that up front and point to the better path.
What to Do If the IRS Rejects Your Offer
If your Form 433-A (OIC) and offer get rejected, you have options.
File an Appeal Within 30 Days
Use Form 13711, Request for Appeal of Offer in Compromise. The appeal goes to the IRS Independent Office of Appeals, which is a separate division that reviews the original decision. Many rejected offers get resolved at this stage.
Submit a New Offer
You can file a new OIC at any time, but it needs to address what the original examiner flagged. Resubmitting the same numbers and documents will get the same result.
Pivot to Currently Not Collectible
If the rejection reveals you cannot pay even the lowest offer amount, you may qualify for Currently Not Collectible status, which pauses collections while your financial situation is what it is.
What a rejection does not mean is that you should accept the outcome and continue making no progress on the original debt. Collection activities resume. Every month you wait, the numbers get worse.
How Omni Handles Form 433-A (OIC) Applications
When someone comes to Omni with an Offer in Compromise, the process does not start with filling out the form. It starts with whether the offer even makes sense.
We review your complete financial situation against the IRS’s Reasonable Collection Potential formula before we agree to file. If the math says an OIC is not going to work, we tell you that upfront and point to the better path. That might be an Installment Agreement, Currently Not Collectible status, or Penalty Abatement.
When we do file, we do these things that DIY applicants miss:
- Document asset valuations with evidence supporting the lowest defensible Quick Sale Value
- Build the case for above-standard expenses using medical records, court orders, and income-production proof
- Include a profit and loss analysis for self-employed applicants that reflects real income, not a single-month snapshot
- Organize the documentation package so the Offer Examiner does not have to chase anything
- Handle all communication with the IRS so you do not say something on the phone that contradicts what is on the form
Matt Mulligan founded Omni over 20 years ago after getting burned personally by two tax firms that took his money and delivered nothing. That story is why Omni is upfront about what is realistic and what is not. If we take your case, it is because the numbers say we can actually help. Over the past 20+ years, Omni has managed more than $203 million in tax liability for thousands of clients.
We review your complete financial picture against the IRS’s RCP formula and tell you honestly whether an OIC is realistic.
We build defensible asset valuations, document above-standard expenses, and package everything for the Offer Examiner.
We handle every IRS response, respond to requests for information, and work the case until it is resolved.
Omni Tax is the third company I used. The first took my money and did nothing. The second started off good, but after years of no resolution I decided to hire Omni Tax. From day one, Lila & Erin from Omni were proactive and on top of my case.
Frequently Asked Questions About Form 433-A (OIC)
Most OIC applications take 6 to 12 months to get a decision. Complex cases can take longer. If the IRS does not make a determination within two years of receiving your complete package, the offer is automatically accepted. During review, collections are paused.
The IRS has limits on what they can physically take: personal effects, tools of your trade, unemployment benefits, certain retirement accounts, minimum exempt amounts of wages, and some government benefits. These thresholds are adjusted annually for inflation under IRC Section 6334. For an OIC, though, almost all assets count toward your Reasonable Collection Potential even if the IRS could not physically seize them.
Yes. All retirement accounts get disclosed. The IRS does adjust the countable value for the taxes and penalties you would pay on withdrawal, which usually brings a $50,000 account down significantly. But omitting a retirement account is one of the fastest ways to get your application flagged or rejected.
You sign the form under penalty of perjury. Intentional misstatements are a felony, though the IRS rarely pursues criminal charges. In practice, the offer gets rejected, your account gets flagged, and collection activity often intensifies. The long-term cost of omitting an asset is far higher than disclosing it.
If your financial situation changes significantly during review, whether a new job, a lost job, an asset sale, or a major expense change, you notify the Offer Examiner. They may request an updated form.
Yes. The IRS allows self-representation. But the 2024 acceptance rate of 21.4% reflects the full pool of applications, including those prepared with representation. DIY applications typically underperform that number. If you have complex assets, business income, or a history of other rejections, professional preparation usually pays for itself many times over.
Yes. You must have filed all required tax returns and made all required estimated payments. If you are an employer, you must be current on tax deposits for the current and past two quarters. The IRS will not process an OIC application if you are not in compliance.
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