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What is an Offer in Compromise?

Asked 45 timesCategory: settlements

An Offer in Compromise (OIC) lets you settle your tax debt with the IRS for less than the full amount you owe.

Who Qualifies?

The IRS considers:

  • Your ability to pay
  • Your income and expenses
  • Your asset equity

The IRS generally will not accept an OIC if they believe you can pay the full amount through an installment agreement.

How to Apply

  1. Use the IRS Pre-Qualifier Tool to check eligibility
  2. Submit Form 656 (Offer in Compromise)
  3. Submit Form 433-A (Collection Information Statement)
  4. Pay the $205 application fee (waived for low-income)
  5. Include an initial payment with your offer

Payment Options

  • Lump Sum: Pay 20% upfront, rest within 5 months of acceptance
  • Periodic Payment: First payment with application, then monthly while IRS reviews

Acceptance Rate

The IRS accepts roughly 30-40% of OIC applications. Working with a tax professional significantly improves your chances.

Important Disclaimer

This information is for educational purposes only and does not constitute tax or legal advice. Consult a qualified tax professional for advice specific to your situation.

Sources

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This information is generated by AI for educational purposes only and is not tax, legal, or financial advice. AI-generated answers may contain errors. Always verify information with a qualified tax professional or the IRS directly. AI Tax Relief is not affiliated with the Internal Revenue Service.