How do I appeal an IRS Offer in Compromise rejection?

If the IRS rejects your Offer in Compromise, you have 30 days from the date on the rejection letter to file an appeal with the IRS Independent Office of Appeals using Form 13711, Request for Appeal of Offer in Compromise. The Appeals Officer reviews the OIC independently using the same Reasonable Collection Potential (RCP) formula, but from a fresh perspective. You can submit additional documentation during the appeal — updated financial statements, new evidence of special circumstances, corrected asset valuations, and expense documentation that may not have been properly considered. The Appeals Officer is independent from the Collection function that rejected your offer.

What are the most common grounds for overturning an OIC rejection?

The most common grounds for overturning an OIC rejection on appeal include: (1) Incorrect RCP calculation — the Collection officer overvalued assets, undervalued allowable expenses, or included exempt assets in the calculation; (2) Failure to consider special circumstances — the taxpayer has a serious medical condition, disability, or other extraordinary factor that warrants acceptance of a lower amount; (3) Incorrect valuation of assets — particularly for real estate, business interests, or hard-to-value property where the Collection officer relied on inflated values; (4) Failure to allow legitimate and necessary living expenses — disallowing housing, transportation, or medical expenses that are necessary and reasonable under IRS Collection Financial Standards.

How long does an OIC appeal take?

An OIC appeal typically takes 3 to 6 months from filing to determination, though complex cases or those in high-volume IRS offices may take longer. During the appeal, collection activity is generally suspended — the IRS typically does not levy while an OIC is pending (including during the appeal period). If the Appeals Officer sustains the rejection, you can request that the offer amount be treated as a proposed Installment Agreement, allowing you to pay the offered amount over time instead of losing the case entirely. This is a valuable fallback option if the appeal is not successful.

IRS Appeals

IRS Offer in Compromise Appeals: Overturn an OIC Rejection

Your Offer in Compromise was rejected. The IRS says you can pay more — but their RCP calculation may be wrong. Asset values may be inflated. Legitimate expenses may have been disallowed. Special circumstances may have been ignored. The OIC appeal gives you a fresh review by an independent Appeals Officer who is not bound by the Collection function's decision and who evaluates the offer the same way a court would — looking at what the IRS could actually collect.

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The OIC Appeals Process

Review the Rejection Letter

The IRS rejection letter must explain why your offer was rejected — typically an RCP calculation showing you can pay more. Review every line: asset values, income calculations, expense allowances. Identify exactly where the error is.

File Form 13711 Within 30 Days

File Form 13711, Request for Appeal of Offer in Compromise, within 30 days of the rejection letter date. State the specific grounds for your appeal — don't be generic. Reference the errors in the RCP calculation and attach supporting documentation.

Submit Additional Evidence

The appeal is your opportunity to correct the record. Submit updated financial documentation, professional appraisals (especially for real estate or business assets), medical records for special circumstances, and expense documentation the Collection function overlooked.

Appeals Officer Independent Review

The Appeals Officer re-evaluates your OIC from scratch using the same RCP methodology but with independent judgment. They are not bound by the Collection officer's determinations and can accept your offer if they find the rejection was based on incorrect analysis.

Decision & Fallback Options

Typical timeline: 3-6 months. If Appeals sustains rejection: request the offer amount be treated as a proposed Installment Agreement. If Appeals accepts: the offer moves to processing and, once accepted, you must remain in compliance for 5 years (or until the CSED, whichever is earlier).

Common Reasons OIC Appeals Succeed

Incorrect RCP Calculation

The Collection officer miscalculated your Reasonable Collection Potential by overvaluing assets, including exempt assets (retirement accounts, necessary tools), or applying the wrong monthly disposable income figure.

Special Circumstances Ignored

The IRS allows acceptance of a lower offer amount based on special circumstances: serious illness or disability, advanced age, limited earning capacity, or other factors that make full collection unlikely. Collection officers often fail to properly weigh these factors.

Incorrect Asset Valuation

Real estate appraisals, business valuations, and valuations of illiquid assets are often inflated. A professional appraisal obtained during appeal can dramatically reduce the RCP and justify acceptance of your original offer amount.

Legitimate Expenses Disallowed

Collection officers sometimes disallow necessary living expenses, claiming they exceed IRS Collection Financial Standards, without considering the specific facts. Medical expenses beyond the standard, private school tuition for children with special needs, and secured debt payments must be properly evaluated.

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