Offer in Compromise: Settle Your IRS Tax Debt for Less
If you owe more in taxes than you could ever reasonably pay, an Offer in Compromise (OIC) may let you settle your debt with the IRS for a fraction of the balance. We evaluate your eligibility, prepare the required financial disclosures, and negotiate the best possible outcome on your behalf.
We will contact you to arrange a call about your situation, service scope, and pricing. Specific tax advice is provided under an engagement.
What Is an Offer in Compromise?
An Offer in Compromise is a formal agreement between you and the IRS that resolves your tax liability for less than the full amount due. It is governed by Internal Revenue Code § 7122 and is intended for taxpayers who genuinely cannot pay the full balance, who can show the assessed amount is incorrect, or who meet effective tax administration criteria.
For a collectibility offer, the IRS evaluates your reasonable collection potential (RCP), combining net realizable asset equity with a portion of future disposable income. Liability disputes focus on whether the assessed tax is correct. Effective tax administration offers require evidence of hardship or other qualifying circumstances.
The forms, evidence, fees, and payment requirements depend on the grounds for your offer. See IRS Topic 204 and the separate Form 656-L instructions.
When an OIC Makes Sense
- Doubt as to collectibility: You owe more than you could repay within the collection statute (typically 10 years) given your income and assets.
- Doubt as to liability: You believe you do not actually owe the amount assessed and can substantiate it.
- Effective tax administration: Full payment would cause economic hardship or be unfair given your circumstances, even if technically collectible.
How the IRS Calculates Your Offer Amount
For doubt-as-to-collectibility offers, the IRS generally evaluates these components of RCP:
A clear path forward
Our Offer in Compromise Process
From the initial eligibility review to the IRS decision, we guide you through each stage of your offer.
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Eligibility review
We identify whether your case concerns collectibility, a liability dispute, or effective tax administration, then assess the applicable requirements.
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Review prerequisites
For Form 656 offers, we review required returns, current estimated payments, applicable payroll deposits, and bankruptcy status. Liability disputes follow the separate Form 656-L instructions.
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Prepare the right evidence
For collectibility or effective tax administration, we prepare the applicable Form 433-A (OIC) or 433-B (OIC) and supporting financial records. For liability disputes, we prepare the explanation and evidence required by Form 656-L.
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Prepare and submit
We submit Form 656 with the applicable fee and initial payment, subject to exceptions. A doubt-as-to-liability offer instead uses Form 656-L, with no application fee or initial offer payment.
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Negotiate and resolve
We respond to IRS requests and review appeal options when appropriate. If accepted, you make the agreed payments and follow the terms applicable to your offer.
Questions & answers
Frequently Asked Questions
An Offer in Compromise is one of several resolution paths. If you are unsure which applies to you, we will assess your situation confidentially.
Request a free initial consultation What is an Offer in Compromise?
An Offer in Compromise (OIC) is an agreement with the IRS that settles a tax liability for less than the full amount owed. The grounds are doubt as to collectibility, doubt as to liability, or effective tax administration. Each ground has different requirements; acceptance is not guaranteed.
Who qualifies for an Offer in Compromise?
We first identify the grounds for an offer. For doubt as to collectibility or effective tax administration, we review filing and payment compliance, bankruptcy status, and financial information using Form 656 and the applicable Form 433-A (OIC) or 433-B (OIC). A genuine dispute about the existence or amount of the tax debt follows the separate Form 656-L requirements for doubt as to liability.
How much will the IRS settle for?
There is no fixed percentage. For collectibility offers, the IRS generally calculates reasonable collection potential (RCP) from net realizable asset equity and a portion of future disposable income, typically 12 or 24 months depending on the payment terms. Liability disputes and effective tax administration offers require separate analysis of the applicable grounds and supporting evidence.
What are the steps to submit an Offer in Compromise?
For doubt as to collectibility or effective tax administration, we assess Form 656 and the applicable Form 433-A (OIC) or 433-B (OIC), fee, and initial payment, subject to exceptions such as the qualifying low-income exception. For doubt as to liability, we assess Form 656-L and its separate requirements; no application fee or initial offer payment is required. We submit the appropriate evidence and respond to IRS requests during review.
Will an Offer in Compromise stop IRS collection actions?
Submitting a properly filed OIC generally pauses most enforced collection (levies, garnishments) while the offer is under review, as long as you stay compliant with current filing and payment obligations. It does not automatically stop an existing lien, but new levies are typically held.
What happens if my Offer is rejected?
A rejection letter explains how to appeal to the IRS Independent Office of Appeals within 30 days of the letter’s date. Required offer payments already made are generally nonrefundable and applied to your tax liability; the entire proposed offer amount is not automatically paid. We review the decision and alternatives, which may include an installment agreement or Currently Not Collectible status. A returned offer has different procedures from a rejected offer.
Why file your taxes with Mraz Tax Solutions LLC?
We focus on individual and small business returns, whether you are filing a W-2, reporting 1099 income from the sharing economy, or running your own company.
Our process is designed to minimize your tax burden and secure the maximum refund you are legally entitled to by taking time to understand your situation, your records, and your long-term goals.
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Get in Touch
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Request a free initial consultation to discuss your situation, service scope, and pricing. We will contact you to arrange a call. Specific tax advice and ongoing planning are provided under the terms of an engagement.
Office visits are by appointment. We accept tax-document drop-offs after a signed engagement agreement and by prior arrangement. Please request an appointment before visiting.
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