Settle IRS Tax Debt for Less Than You Owe — If You Qualify
An Offer in Compromise may allow qualified taxpayers to resolve IRS tax debt for less than the full balance. We review your income, expenses, assets, tax history, and IRS transcripts to determine whether this option may fit your case.
Free, confidential review. No obligation.
Free OIC Eligibility Review
Complete this form to see if you may qualify for an Offer in Compromise.
IRS Program Overview
What Is an Offer in Compromise?
An Offer in Compromise (OIC) is an IRS program that may allow qualified taxpayers to settle their federal tax debt for less than the full amount owed. The IRS evaluates your ability to pay based on your income, expenses, assets, and future earning potential.
The IRS receives approximately 60,000 OIC applications each year and accepts roughly one-third. A properly prepared application — one that accurately reflects your financial situation and meets IRS guidelines — has a significantly higher chance of acceptance.
Most OIC Applications Fail When Submitted Without Proper Analysis
The IRS applies strict formulas to calculate your "reasonable collection potential" (RCP). Submitting an offer that doesn't accurately reflect your RCP — or omitting required documentation — leads to rejection. We calculate your RCP before you apply.
OIC Key Facts
Avg. Settlement
Varies by case
Processing Time
6–24 months (IRS)
Application Fee
$205 (2026)
Initial Payment
20% of offer (usually)
Low-income taxpayers may qualify for a reduced or waived application fee. We verify eligibility during the review.
Eligibility
Three Paths to OIC Eligibility
Doubt as to Collectibility
The most common path. You agree you owe the tax, but you cannot afford to pay it in full — now or in the foreseeable future. The IRS reviews your income, expenses, assets, and future earning capacity to calculate what you can reasonably pay.
- Example: Taxpayer owes $45,000 but has only $150/month disposable income after allowable expenses, with limited assets. The IRS may accept a reduced amount reflecting that capacity.
Doubt as to Liability
You believe the IRS has assessed the wrong amount — perhaps income was misreported, deductions were disallowed incorrectly, or a prior return was filed in error. If you can show the tax is not legally owed, the IRS may reduce or eliminate it.
- Example: IRS assessed tax based on unreported income that was actually a non-taxable transfer. Taxpayer provides documentation disproving the assessment.
Effective Tax Administration
You can afford to pay, but doing so would be unfair or inequitable due to exceptional circumstances — such as serious illness, disability, or other hardship. This is the rarest path and requires compelling facts.
- Example: Taxpayer with severe medical condition could pay but doing so would deplete funds needed for ongoing treatment and living expenses.
IRS Calculation
What the IRS Evaluates
The IRS uses a formula called 'Reasonable Collection Potential' (RCP) to determine your offer amount. Understanding this formula is critical.
Monthly Income
Wages, salaries, self-employment income, rental & investment income, Social Security, retirement distributions, and other household income sources.
Allowable Expenses
Housing & utilities (IRS caps apply), vehicle costs, healthcare, court-ordered payments, current-year taxes, and other necessary living expenses per IRS Collection Financial Standards.
Assets & Equity
Real estate (FMV minus loans), vehicles (FMV minus loans), bank accounts, investments, retirement accounts, business assets, and personal property of significant value.
Future Income Potential
Age, remaining working years, education, earning capacity, health and disability factors, career outlook, dependents, and family situation all factor into the IRS calculation.
Rough Formula: Offer = (Monthly Disposable Income × 12 or 24) + Asset Equity
Simplified illustration. Actual IRS calculation involves detailed schedules, allowable expense caps, and specific asset valuation rules.
How We Help
Our OIC Process
Free Eligibility Review
We discuss your situation, estimate your RCP, and determine if an OIC is likely viable.
Day 1
IRS Transcript Pull
We pull and analyze your IRS account and wage transcripts to verify balances, filing status, and CSED dates.
Day 1–3
Financial Analysis
We gather income, expense, and asset documentation and apply IRS Collection Financial Standards.
Week 1–2
Offer Calculation
Based on RCP formula, we determine the appropriate offer amount to submit to the IRS.
Week 2
Full Application Package
We prepare Forms 656, 433-A (OIC), and all supporting documentation to IRS specifications.
Week 2–4
IRS Follow-Up & Resolution
We respond to IRS requests, attend meetings, and pursue acceptance. If rejected, we evaluate appeal options.
6–24 months
Why Professional Help
DIY vs Professional OIC Preparation
Preparation
Documents You May Need
IRS wage & income transcripts
All open tax years
IRS account transcripts
All open tax years with balance details
Pay stubs
Last 3 months for all household earners
Bank statements
Last 3–6 months, all accounts
Investment & retirement statements
Most recent quarterly statements
Real estate valuation & mortgage statements
Current market value and loan balances
Vehicle loan statements & valuations
Current Kelley Blue Book or NADA values
Monthly expense documentation
Bills, receipts, recurring payments
Business financial statements
If self-employed or business owner
Prior year tax returns
If any returns remain unfiled
Court orders
Child support, alimony, other legal obligations
Medical expense documentation
If claiming health-related hardship
Avoid These
Common OIC Mistakes
Filing without being current on tax returns
The IRS will return your OIC application if you have unfiled required returns. All returns must be filed before you apply.
Underreporting income or assets
The IRS cross-references your financial disclosure against third-party data (W-2s, 1099s, bank records). Misstatements can result in rejection or worse.
Submitting an unrealistically low offer
The offer must reflect your RCP — not what you wish you could pay. An offer below the IRS's calculated minimum will be rejected regardless of hardship.
Missing required documentation
The IRS issues detailed document requests after submission. Missing or incomplete responses within the deadline result in automatic return of the application.
Not understanding what happens if rejected
If the IRS rejects your OIC, you have 30 days to appeal. Meanwhile, collection actions may resume. We prepare for both outcomes.
Questions
Offer in Compromise FAQ
The IRS charges a $205 application fee. You must also include an initial payment with your offer — typically 20% of the proposed settlement amount for lump-sum offers. Low-income taxpayers (below certain income thresholds based on family size) may qualify for a fee waiver. We verify this during your review.
IRS processing times typically range from 6 to 24 months, depending on case complexity, IRS caseload, and whether the application requires additional documentation or appeals. During the evaluation period, the IRS generally pauses most collection actions. We track your case throughout the process.
You have 30 days to file an appeal using IRS Form 13711. The IRS Office of Appeals independently reviews the decision. If the appeal is unsuccessful, you can explore other resolution options such as installment agreements or Currently Not Collectible status. We evaluate all paths with you.
Yes — the IRS accepts self-prepared OIC applications. However, the Forms 656 and 433-A (OIC) are detailed, the IRS Collection Financial Standards are complex, and the RCP calculation must be precise. Most self-prepared applications are rejected for technical issues. Professional preparation significantly improves acceptance rates.
Generally yes — once the IRS accepts your OIC for processing, most collection actions are suspended. However, the IRS may still file a Notice of Federal Tax Lien during this period. If you have an active levy or garnishment, we address those before filing.
Thousands
Taxpayers Helped Nationwide
~60K
OIC Applications Filed Annually
~33%
IRS Acceptance Rate (Avg.)
Higher
Acceptance with Pro Help
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Take the first step. Complete our confidential OIC eligibility form and we'll evaluate your situation — free and with no obligation.
New Beginning Tax Solutions is a private tax resolution company and is not affiliated with the IRS or any government agency. Results vary.