IRS Offer in Compromise: Settle for Less Than You Owe
IRS penalties add up fast. The IRS may reduce or remove them through penalty abatement if you qualify. Omni Tax Help’s Tax Analysts can guide you through the process and fight for relief on your behalf.
How the Offer in Compromise Works
The IRS OIC program allows taxpayers facing hardship to resolve unpaid balances for less than they owe. The IRS accepts an offer when it’s clear that collecting the full amount isn’t realistic.
- Can cover personal and business taxes
- May stop levies, garnishments, or collection calls
- Requires filing all returns and staying compliant going forward
Who Qualifies?
The IRS looks closely at your financial situation, including income, expenses, and assets. You may qualify if:
- Paying in full would cause serious financial hardship
- You can’t cover basic living expenses plus your IRS balance
- You’re up-to-date with all required tax filings
Application at a Glance
The IRS Offer in Compromise process is paperwork-heavy, but here’s the simplified version:
- Complete Form 656 (Offer in Compromise) and Form 433-A/B (financial details).
- Include the IRS application fee — currently $205 (unless you qualify for a low-income waiver). You can always confirm the latest amount in the official IRS Form 656 instructions.
- Make your initial payment (20% for a lump-sum offer, or the first installment for a payment plan).
- Submit your full package by mail. Incomplete forms or missing documents will lead to rejection.
- Wait for review — most cases take 8–12 months.
Payment Options
You can propose how to pay once the offer is accepted:
- Lump Sum: 20% upfront, balance within 5 or fewer months
- Periodic Payments: Start with the first payment, then continue monthly until paid, not exceeding 24 months
If your OIC is denied, you may still qualify for an installment agreement or Currently Not Collectible status.
Why Work With Omni Tax Help
Most OICs fail because of incomplete forms, unrealistic offers, or missed compliance steps. Our team of experienced Tax Analysts can:
- Review your eligibility before you apply
- Prepare and file a complete OIC package
- Work directly with the IRS to ensure your offer is realistic
- Help with alternatives if your offer is denied
With expert guidance, you can improve your chances and avoid costly mistakes.
FAQ (Offer in Compromise)
The IRS calculates based on your ability to pay, not just what you want to settle for.
Most cases take 8–12 months. Complex cases may take longer.
The IRS does not report Offers in Compromise to credit bureaus, meaning this type of tax resolution has no direct impact on your credit history or score.
You can appeal or explore other relief programs, like installment agreements.