2020 Guide to the IRS Offer in Compromise Program & Form 656

How to Settle Your Tax Debt with an IRS Offer in Compromise (OIC)

The IRS Offer in Compromise (OIC) Program was created to help people deal with excessive back taxes, allowing them to settle their debt with the IRS for less than they actually owe.

In 2020, to qualify for an Offer in Compromise settlement, you must apply to the IRS suggesting the amount of money you’re capable of paying them, which they’ll then review and either agree to your offer or reject it.

When the IRS is considering an Offer in Compromise application they will take into account your ability to pay the full amount owed, your income and expenses, as well as any assets or equity that you may own.

The IRS will only approve your Offer in Compromise form if they think that your offer is the best deal they can get from you (the most amount of money they could collect), so it’s a relatively open-ended process that involves all sorts of posturing and negotiating, even though no face to face negotiations are done.

Before You Apply for an Offer in Compromise

One thing to point out before we go through all the details of the Offer in Compromise IRS Program is that you do have to pay a fee to get the IRS to even consider your application.

That is to say, unlike some of the other IRS Debt Forgiveness Programs, the Offer in Compromise is not entirely free, so there is an up-front cost associated with getting an OIC accepted, and you need to take that into account when making your cost calculations.

Also, it’s important to know that the IRS will reject your OIC application outright if you haven’t already filed your tax returns for the debt in question, and they won’t return or refund your application fee, so make sure to get those taxes filed even if you don’t plan on paying them just yet.

Once you’ve filed your taxes and gotten all the math squared away squared with the IRS in terms of what you think you owe them, then you can start working on negotiating for a reduced debt via OIC.

Who is Eligible for an Offer in Compromise?

This isn’t a program that just anyone can apply to and get accepted into, in fact, there are pretty specific requirements for determining who can actually get an Offer in Compromise from the iRS.

The easiest way to determine if YOU are eligible is to use the IRS’s Online Offer in Compromise Pre-Qualifier Tool, which you can find here.

This tool asks some specific questions about you, your debt, etc., and lets you know if you’re eligible for an OIC, or if there’s something else that you need to do in order to become eligible for the program, so be sure to look at this BEFORE spending the time to fill out and submit an OIC application.

For the purposes of this post, however, let me outline the requirements you need to pass in order to be eligible for an OIC. There are three main requirements for OIC applications, and you only need to satisfy ONE of the following in order to qualify for an OIC:

You must be able to prove that the IRS thinks you owe the more than you actually do owe, OR
You must show that the IRS won’t be able to collect all the money from you before their collection statute expires (which is 10 years, and which usually happens because your assets and income are much lower than your IRS debt, and which are not likely to increase at any time in the near future) OR
You must be able to show that paying your total tax debt would be an unfair burden on your life, basically making you impoverished or threatening your ability to provide food, shelter and clothing for yourself and/or your dependents

If you can’t satisfy at least one of the above conditions, then don’t even bother submitting an OIC, because the IRS will reject it immediately. Instead, take a look at your other options for Settling IRS Debt, which I’ve written about thoroughly on other pages of this website.

What if I Don’t Qualify for an Offer in Compromise?

After reviewing the details above, if you’ve determined that you won’t qualify for the Offer in Compromise Program, don’t give up just yet, because there are still all sorts of other tax debt relief programs that you may be able to take advantage of.

If you’re not yet in too much trouble with the IRS, you should start your research with my Guides on the Federal Tax Debt Collection Process, IRS Penalties, Fins & Fees, IRS Tax Penalty Abatement, and Filing & Paying Back Taxes.

If you’re already in deep trouble with the IRS, you’ll want to check out my Guides to Applying for the IRS Fresh Start Program, Qualifying for IRS Tax Debt Forgiveness, Negotiating an IRS Tax Debt Settlement and Stopping an IRS Wage Garnishment.

Finally, if you just want to pay someone else to help you deal with everything, be sure to look at my Guide on Choosing the Right IRS Tax Resolution Service, where I’ll teach you how to pick a debt settlement agency that actually helps you get rid of your debt!

I Think I Qualify for an OIC, Should I Submit my Offer?

If you clearly qualify for an Offer in Compromise based on what I’ve explained above, then I would highly suggest you submit an OIC application, unless you’re getting close to the 10 year statute of limitations on your debt.

If you’re nearly at the point where the IRS will no longer be able to pursue your debt, because it’s already been 7, 8, or even 9 years, and you think you can continue to hold them off without losing all your financial standing due to credit hits, wage garnishments, liens and asset seizures, then I’d say forget about OIC and just try to wait them out.

It’s honestly pretty dang rare that anyone manages to outmaneuver the IRS for the 10 year statue and manages to get all their debts wiped out, however, so keep that in mind if you’re something like 2, 3 or even 4 years into the process.

Basically, the only way to hit that 10 year mark is to have some super complicated financial arrangements, an exceptional legal team, and some incredibly clever accountants on your side!

If I Do Qualify, Does That Mean I’ll be Approved?

While anyone can submit an OIC application, most people who actually get them approved have gone through some sort of major life change in terms of their income or assets, and the majority of people requesting Offers in Compromise are elderly, retired, disabled, or going through some sort of incredibly extenuating circumstances.

Also, remember that just because you are eligible to apply for an OIC based on the three points above, don’t think that this means you’ll actually receive an approval for your application; someone at the IRS is going to review the details you submit and make that determination on their own.

It’s 100% possible for someone to be eligible to submit an OIC, but have that OIC turned down.

Again, when the IRS is evaluating your application, they’re going to analyze your ability to actually pay the amount that you owe, as well as your ability to pay the amount you’re proposing paying, and they’ll decide if they think you’re making a fair offer or not.

To put that into perspective, let’s just say that the OIC doesn’t work all that well unless you truly have experienced some wild life event that led to you owing the IRS way more money than you could actually ever pay them. It’s fringe cases like that which this program was designed to solve.

With that said, let’s look at the three different types of Offers in Compromise.

The Three Types of Offers in Compromise

There are three different types of Offers in Compromise, each of which you’ll need to review to determine which type best applies to your situation, and which gives you the best chances of receiving an approval from the IRS reviewer who looks over your application.

The three types are:

1. OIC Type 1 -Doubt as to Collectability

The Doubt as to Collectibility Offer in Compromise basically says that you admit you owe whatever amount of money the IRS claims you owe, but there’s no way that you could actually pay it now or at any point in the near future.

This type hinges on your ability to leverage assets, earn income, etc., in order to pay back your debt, and is essentially telling the IRS that you aren’t going to be able to come up with the money you owe them before the 10 year collection statute expires.

This settlement is not about what you owe, but about what you can afford.

2. OIC Type 2 – Doubt as to Liability

The Doubt as to Liability Offer in Compromise says that you think the IRS has done their math incorrectly, and that you don’t actually owe them as much money as they’re trying to get from you.

This Type can arise from an error at the IRS in their calculations, a mistake made by your accountant, CPA, or even by yourself, when calculating your taxes.

The core claim with a Doubt as to Liability OIC is that you’re stating if the mistake in math were corrected, you’d actually owe less than the IRS wants.

In this case, we’re not talking about what you can afford, but about what you think you actually should owe.

3. OIC Type 3 – Effective Tax Administration

If you don’t qualify for either OIC Type 1 or Type 2, but you have faced some sort of exceptional circumstances, then you can attempt to get an IRS Settlement via the Effective Tax Administration Offer in Compromise.

There are two subtypes for the Effective Tax Administration OIC, the first being “Hardship”, and the second being “Equity of Public Policy”.

The Hardship Effective Tax Administration Offer in Compromise states that you may qualify to pay back all the taxes that you owe, but that doing so would result in facing an economic hardship, which basically means that it would put you out of house, home and food.

The Equity of Public Policy Effective Tax Administration Offer in Compromise says that it’s the IRS’s fault that you owe more money than you can afford, because the IRS made a processing error, gave you bad advice, caused unreasonable delays notifying you about what you owed, leading to huge penalties and interest charges, or that the taxes owed are due to someone else’s criminal behavior, or that the IRS’s failure to accept your offer would have a huge impact on your local community.

Next, let’s look at the two different OIC Offer Types, which allow you to decide if you’re going to pay off your debt all at once, or over a longer period of time.

The OIC Application Fee & Initial Payment

One thing to point out right up front is that participation in the Offer in Compromise Program is not free!

When you submit your OIC Application, you have to include two different forms of payment, including an Application Fee, and something called an “Initial Payment”.

The Application Fee part is straightforward, and it is $186 flat, no matter how much money you owe, how much your’e offering, etc.

Sometimes you’ll need to pay multiple amounts of the $186 Application Fee, like if you’re settling both personal and business tax debt (I’ll get to this a little later in this Guide), but at least you know exactly what has to be paid on this front, and since it’s only $186, it’s basically a tiny amount of money too.

The second payment you have to include with your OIC Application is the “Initial Payment”, which can get quite expensive.

The Initial Payment is basically like a Good Faith payment you make to the IRS, promising them that you’re serious about handling your debt and proving to them that you can actually afford to make the payments you’ve laid out in the OIC Application.

The amount of your Initial Payment will be structured based on which type of Payment Schedule you choose to use for your OIC, and it’s very, very important that you pay close attention to this part of the process, because it could make or break the IRS’s decision to accept your Offer.

One incredibly important thing to keep in mind about your Initial Payment is that the IRS will get to keep the money you include here even if they reject your OIC.

The IRS will have to apply this Initial Payment money to your tax debt, but since they get to keep it, you need to take that into account when choosing which types of offer you want to make.

OIC Payment Plans (“Lump Sum” vs. “Periodic Payments”)

You’ll have the option of structuring your OIC in one of two ways, using either the Lump Sum Payment Plan, or the Periodic Payments Plan.

The first OIC Offer Type is called a “Lump Sum” offer, in which you promise to pay off your entire debt within 5 months of the IRS’s acceptance of your offer, making payments monthly.

The second OIC Offer Type is called a “Periodic Payment” offer, in which you may pay off the full amount over the course of up to 24 months of payments, again, making payments monthly.

Almost everyone who applies for the OIC Program tries to qualify under the Periodic Payment plan, because it’s much easier to come up with money over a longer period of time – taking up to 2 years to pay off the debt – instead of having to pay it all off within just 5 months.

The type of plan you choose isn’t going to make a big difference in the IRS’s accepting or rejecting your offer, and in fact, it may even be easier to get them to approve your offer using the Periodic Payment plan if you’re truly stretching to come up with the cash, because that makes it more likely you’ll be able to hit your payment targets.

As I mentioned earlier, however, one thing that will probably make a huge impact on determining whic payment schedule you choose is going to be the “Initial Payment”, which is a certain amount that you have to pay the IRS in conjunction with your Offer in Compromise Application, and which the IRS can keep even if they reject your OIC Application!

The Initial Payment is structured differently if you choose to use the Lump Sum Plan vs. the Periodic Payments Plan, so let’s look at how that works next.

OIC Initial Payments Using the Lump Sum Cash Plan

If you chose to structure your Offer in Compromise using the Lump Sum Cash Plan, then your initial payment must be at least 20% of the total amount you propose paying the IRS via the OIC Program.

OIC Initial Payments Using the Periodic Payments Plan

If you choose to structure your Offer in Compromise using the Periodic Payments Plan, then your initial payment can be whatever you’d like it to be, which gives you much more flexibility in terms of what you offer up front.

Now that we’ve got that covered, let’s look at the full details for each Payment Schedule so you can see pros and cons of each of them and determine which one will work best for your particular situation.

The OIC Lump Sum Payment Schedule

If you don’t think you’re going to have a ton of trouble coming up with the amount of money that you plan on offering the IRS via your OIC, then you may want to choose the Lump Sum Payment Schedule.

While you might think this plan requires paying everything off all at once, in a single large payment, you’ll actually get up to 5 months from the point in time that the IRS accepts your offer to pay off the debt.

The advantage to choosing a Lump Sum Payment Schedule for your OIC is that the IRS typically agrees to lower amounts of money via this payment schedule, since they recognize the fact that it’s harder to come up with a bigger amount of money in a shorter period of time.

That means that you can get a better deal via the Lump Sum Payment Schedule than you’re likely to get from the Periodic Payments Schedule, so if your goal is to simply minify the amount of money you’re going to end up paying the IRS, then this is probably the payment schedule you’ll want to select.

Remember, the whole deal with the OIC Program is that you’re negotiating the amount of money you can actually afford to pay the IRS, so the reasonable collection potential via the Lump Sum Payment Plan is simply lower than what could be expected from the Periodic Payments Schedule (5 months vs 24 months).

There is one big downside to the Lump Sum Payment Schedule, however, in that your Initial Payment using this schedule can be incredibly expensive, since it must be at least 20% of the amount of money you are offering the IRS.

Also, just to make the point as clear as possible, remember that the IRS can keep your Initial Payment, even if they decide to reject your Offer in Compromise, so you’re giving them 20% of the total amount you offer with no guarantee that they’ll even agree to your proposed plan. Pretty risky!

The OIC Periodic Payments Schedule

The Periodic Payment Schedule is the one that most people choose to utilize when submitting an Offer in Compromise Application to the IRS, because it gives you way more time to come up with the money that you’re offering them, and because it requires a much lower Initial Payment.

With the Periodic Payment Schedule, you’ll get up to 24 months to pay off your debt, and while you have to make monthly payments over the course of time you plan on paying off the debt, you can structure the amounts of those payments however you want.

Some who are having major financial struggles in the short-term, but who think they’ll have access to larger funds later on may choose to use the Periodic Payments Schedule as it lets them start off with low monthly payments that grow in size over time.

In the industry, this is referred to as a “back-loaded” Periodic Payment Schedule, because it ends up offering the IRS larger monthly payments at the back end of the schedule.

One important thing about the Period Payments Schedule is that even if the IRS accepts your offer, you have to make absolutely certain that you are never late for a single payment, because missing just one of them automatically cancels your enrollment in the Offer in Compromise Program, and forces you to start all over again with putting together another Offer Application, or attempting to resolve your IRS debt in some other way.

There are several huge advantages to the Periodic Payments Schedule, each of which should be obvious by this point, but they are that you get way longer to pay off your debt (24 months instead of just 5 per the Lump Sum Payment Plan), that you can structure the amounts of your payments however you like, and that your Initial Payment can be whatever you want to set it at (including a small amount, compared to the 20% required by the Lump Sum Payment Plan).

My opinion is that if you have any reason to doubt that the IRS is going to accept your Offer in Compromise, you’d certainly want to structure it using the Periodic Payments Schedule so that you don’t lose that 20% Initial Payment right off the bat if they do choose to reject your OIC Application.

How To Submit an Offer in Compromise Application

Once you’ve decided to submit an OIC application, you’ll need to complete the process outlined in the IRS’s Offer in Compromise Booklet, Form 656-B, which you can find here.

Per the IRS’s instructions, your Offer in Compromise Application must include:

IRS Form 656, the official Offer in Compromise Form
IRS Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals (if this applies to your specific case)
IRS Form 433-B (OIC), Collection Information Statement for Businesses (if this applies to your specific case)
An application fee of $186, unless you meet the IRS’s Low-Income Certification requirements
An Initial Offer Payment (which I’ll cover in a moment), again, unless you meet the IRS’s Low-Income Certification Requirements

Keep in mind that the IRS will reject your OIC application without consideration if you have not completed and signed the Collection Information Statements, Form 433-A and/or Form 433-B, and they will NOT return your $186 application fee if you apply without all the required documentation.

Now, the IRS also offers guidance on submitting your application based on your specific financial situation, explaining that there are three distinct processes for applying for an OIC, which are:

If you and your spouse owe joint and separate tax debts
If you owe individual and business tax debt
If you have tax debt from a limited liability company

Since the processes for applying for an OIC are different depending on which of the three categories listed above you fall into, let’s look at those in detail next.

Applying for OIC if You and Your Spouse Owe Joint and Separate Tax Debts

If you and your spouse have tax debt that you owe together, but you also have separate tax debts as well, then you’ll need to each submit your own Form 656.

In the Form 656 for yourself, you need to list all your joint and separate tax debts, and your spouse needs to do the same, listing all their joint and separate tax debts.

If you and your spouse or ex-spouse have a joint tax debt, and your spouse or ex-spouse doesn’t want to participate in the OIC program, then you may submit a Form 656 for just your responsibility for the joint tax debt, and they won’t have to submit any paperwork at all.

Each Form 656 requires it’s own $186 application fee and initial payment offer, unless you meet the Low-income Certification guidelines.

NOTE 2: The IRS will consider you an “individual” if you are trying to qualify for an OIC on a tax debt liability for which you are personally responsible, including any liability that arose from you being a sole proprietor.

Applying for OIC if You Owe Individual and Business Tax Debt

If you have both individual and business tax debt that you want to apply for an OIC on, then you’ll need to send in two separate versions of Form 656.

You’ll complete the 1st Form 656 making it specific to your individual tax debt, and the other Form 656 making it specific for your business tax debts.

Each Form will require a separate $186 application fee and initial payment, so don’t forget about that part of the process.

Per the IRS rules, a “Business” is defined as a Corporation, Partnership or any Business that operated in any way other than a sole-proprietorship.

NOTE: The IRS will NOT compromise on debt for an individual’s share of a partnership. Instead, the partnership must apply using its own offer and it’s own Form 656, basing it’s offer on the partnership’s and partners’ ability to pay off the debt.

Applying for OIC if You Have Tax Debt From a Limited Liability Company (LLC)

If your LLC incurred employment taxes or excise taxes then two forms 656 must be submitted, with a separate application fee and initial payment for each offer you make, even if the tax debts were reported under the same Tax Identification Number.

One Form 656 will cover individual tax debts, and the second will cover the LCC employment tax debts and excise tax debts.

You will need to include separate $186 application fees for each Form 656.

What is the IRS Standard for Low-Income Certification?

Per IRS guidelines, you will qualify as “low income” if your monthly income is at or below 250% of the Federal poverty guidelines.

The advantage to qualifying as low-income is that it lets you avoid the $186 application fee for Offer in Compromise applications, in addition to other benefits from the IRS.

A Couple Things to Consider BEFORE Submitting an Offer in Compromise

After reviewing all the documentation on this program, looking at reviews and stories posted online by people who’ve participated in it, and speaking to CPAs and Tax Attorneys with actual experience utilizing OIC for their clients, I’ve collected a few nuggets of information that I think are important to review before filing your application.

How Much Should You Offer?

Perhaps the most important thing to remember before submitting your OIC Application is the fact that the IRS can reject it if they don’t think you’re offering them a good enough deal.

This is why so many people end up hiring professionals to help them with their OIC submissions; if you haven’t dealt with the IRS before, then how are you supposed to know what kind of offer they’ll accept?

Unfortunately, the entire process hinges on the IRS Employee who reviews your offer, and your personal financial situation and life experiences are going to play heavily into their evaluation, making it very difficult to give any sort of blanket advice on what you should do here.

For example, I would never give advice like: “As long as you offer 90% of what’s owed, the IRS should accept it”, because there are no hard rules about what they have, or are likely to do here.

Can You Actually Remain Compliant?

Another thing to consider is that if and when you do get approved for the OIC program, you have to remain fully compliant will all tax filing and payment obligations for a period of at least five years from that point onward.

This means that you can never miss any payments as set forth in your OIC, you can’t be late filing or paying your taxes in the future, and basically can’t make any mistakes at all with handling your taxes.

If you do screw anything up during the five year period, then the IRS will cancel your OIC and you’ll have to start all over again in determining how to handle your back tax debt.

When Calculating What You Can Afford…

As you’re putting together your paperwork and planning what you can actually afford to offer the IRS, make sure to take into account the fact that they will NOT be giving you any tax returns during the year your offer is accepted, and that they will instead apply those directly to your tax debt.

This is especially important for people who are thinking about using the Periodic Payment schedule, and who were thinking about using their tax return funds to make those monthly payments.

If you were expecting a huge return, and thinking you could use that as part of your structured payments, then you’ll have to find another way to come up with that money because it’s simply not going to be available to use in this way.

Can the OIC Backfire Against You?

Absolutely! As I outlined above in the section on whether or not you should submit an OIC Application, it’s not always a good idea to try and deal with the IRS.

This is especially true if you’re nearing the end of the 10 year statute of limitations on your debt, and more especially because submitting an OIC requires agreeing to give the IRS an extension on their statute of collectability.

Just by submitting the paperwork for an OIC, you legally agree to give the IRS an extension of at least as long as it takes them to review your Offer, plus one additional year, so if you’re nearing the end of the 10 year period, you probably don’t want to give them even more time to come after you.

On the Bright Side…

It is possible to use the Offer in Compromise Program to help alleviate some of the pressure the IRS puts on people who are in the Collections Process, and facing tax levies, wage garnishment or even asset seizures.

How? Because the IRS agrees not to levy any assets while it’s considering an Offer in Compromise Application, unless it believes that offering this stay puts the collection of taxes owed in jeopardy (typically because they’re nearing the end of their 10 year statute of limitations on collectability).

So, depending on your specific situation, you may want to submit an Offer in Compromise even if you have no intention of getting it approved, but again, this is the sort of thing that only a very creative accountant, Tax Lawyer or CPA would be able to give you good advice on.

I am CERTAINLY not qualified to offer financial advice on this front, and I wouldn’t dare to tell you that it’s a great idea to submit an OIC Application to delay the IRS’s collections process.

I’m merely pointing out that this may be a possible side effect of applying to the program.

I’ve Submitted My OIC – What’s Next?

On average, it’s been reported that it takes the IRS 4-8 months to review an Offer in Compromise Application and determine whether they should accept or reject it, so strap in and prepare to wait a bit before getting your response from them.

Also, note that if you end up getting rejected, but choose to appeal the rejection, it will take even longer to resolve the application process.

Now, it’s important to note that if you chose to structure your OIC using the Periodic Payments Payment Schedule, you’re going to need to keep issuing monthly payments even as the IRS considers your Offer, and that if you miss any of them, your Offer will end up being rejected automatically.

However, if you already had some other Installment Agreement Payment Plan in place with the IRS from before you submitted the OIC Application, then you won’t be responsible for making any other monthly payments outside of what was agreed to there.

The IRS has reserved the right to take up to two years to decide if they’re going to accept your Offer in Compromise, so it could be a fairly long wait before you hear back from them.

One other important note to point out is that if the IRS takes longer than two years to accept your offer, it must be accepted automatically. This happens rarely, but you never know!

If Your Offer in Compromise is Rejected…

If your Offer in Compromise Application is rejected by the IRS, don’t give up quite yet, because you’re still not totally finished with this process.

The IRS is legally mandated to inform you of your rejection via mail, to provide the reason why your Offer was rejected, and to explain to you the process for appealing their rejection decision.

You will, however, only have 30 days to appeal a rejected Offer in Compromise, so you’ll want to get right on appealing their decision, and providing them with a dang good explanation for why you disagree with their rejection.

You’ll need to fill out IRS Form 13711 to repeal their rejection, officially called the “Request for Appeal of Offer in Compromise”.

Don’t think that it’s an easy thing to change the mind of the IRS though, as I have personally never heard of a single person who successfully appealed their rejection.

One other thing you’ll want to utilize when putting together your appeal is the IRS’s “Appeal a Rejected Offer in Compromise Online Self-Help Tool”, which gives all sorts of advice on how to appeal a rejection decision, and which you can find here.

If Your Offer in Compromise Is Returned…

First, realize than a “Returned” OIC Application is not the same as a “Rejected” one, and that a number of things can lead to having your OIC Returned, including:

If you didn’t include all the required information
If you filed for bankruptcy during the IRS’s deliberation process
If you didn’t include the proper application fee
If you didn’t include the proper Initial Payment
If you haven’t filled your applicable tax returns
If you still have outstanding tax liabilities which haven’t been paid

I explained this next point in some of the sections above already, but I’ll say it again to be crystal clear – make sure you don’t screw up the OIC Application process, because getting your OIC Application returned means sacrificing your Application Fee ($184) plus whatever you included as your Initial Payment (up to 20% of your total outstanding debt).

Honestly, I would not submit an OIC Application without having a professional Tax Lawyer, CPA, or some other kind of IRS Resolution Specialist reviewing it before it’s sent out.

If you ask me, the stakes for failure are simply too high to take the risk of doing all this yourself.

If Your Offer in Compromise is Accepted…

If your Offer in Compromise does, in fact, get accepted by the IRS, then you’ll need to make sure that you continue filing and paying your taxes on time!

I’ve pointed this out in some of the sections above, but remember, you will have to be a perfect, model taxpayer for a period of at least 5 years in order for your Offer in Compromise to stick.

If you fail to follow any of the IRS’s tax laws, your Offer in Compromise will be considered to have defaulted, and you’ll have to go back to paying the IRS whatever total amount of money they wanted in the first place, minus whatever payments you’ve made, and plus any new fines, fees or penalties that they issue your debt.

Keep in mind that any Federal Tax Liens in place against you will not be removed until after you’ve satisfied all the conditions of your Offer in Compromise, and that, again, you won’t be getting a tax refund (even if you deserve one!) during the year your OIC Application is approved.

For Questions & Help with Other IRS Tax Problems

If you still have questions about the Offer in Compromise Program, then please feel free to post them in the Comments section below.

I review comments regularly and will do my best to get you a quick response!

Alternatively, you might want to consider looking at the other Guides I’ve developed on this site, which offer assistance for all sorts of other tax-related issues, including:

The Guides above offer all sorts of detailed information about dealing with IRS-related problems, and should be able to help advise you through all kinds of difficult situations.

References

To put this Guide together, I’ve sourced information from all around the web, but my primary documentation always comes from IRS’s official website, which is a treasure trove of excellent advice, Q&As, How To Guides and more.

Here are some specific sources I used to construct the material of this Guide:

The IRS Offer in Compromise Pre-Qualifier Tool – https://irs.treasury.gov/oic_pre_qualifier/
The IRS’s Official Form 656 Booklet – https://www.irs.gov/pub/irs-pdf/f656b.pdf
The IRS’s Offer in Compromise Main Webpage – https://www.irs.gov/payments/offer-in-compromise
The IRS’s Offer In Compromise Appeals Rejection Online Self Help Tool – https://www.irs.gov/appeals/appeal-a-rejected-offer-in-compromise-online-self-help-tool-start

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By: Tim Marshall

Tim's experience helping people with their Student Loan Debt led to the creation of Forget Tax Debt, his new website where he offers tips, tricks and advice for dealing with IRS back tax problems as quickly, and affordably, as possible.

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2020 Guide to The IRS Offer in Compromise Program & Form 656