Offer in Compromise
Settle your IRS tax debt for a fraction of what you owe. The Offer in Compromise program can provide a genuine fresh start.
See If You Qualify
What is an Offer in Compromise?
An Offer in Compromise (OIC) is an agreement between you and the IRS that allows you to settle your tax debt for less than the full amount owed. It's a legitimate program administered by the IRS that helps taxpayers who genuinely can't pay their full tax liability.
The IRS accepts an OIC when the amount offered represents the most they can expect to collect within a reasonable period of time. This is calculated using a formula that considers your income, expenses, asset equity, and future earning potential.
In some cases, taxpayers have settled six-figure tax debts for pennies on the dollar.
Let's Be Honest About OIC Success Rates
You deserve the truth before you invest time and money in an Offer in Compromise. Here are the facts:
The IRS accepts roughly 30-40% of Offer in Compromise applications. This means the majority are rejected — often because the applicant didn't truly qualify.
The IRS application fee is non-refundable if your offer is rejected (waived for low-income applicants). You also must submit 20% of your offer amount upfront.
Why We're Telling You This
Many tax relief companies push OIC to everyone because it sounds exciting — "settle for pennies on the dollar!" But filing an OIC when you don't qualify wastes your money and delays real solutions.
Our approach is different: We'll analyze your situation thoroughly before recommending any path. If OIC isn't right for you, we'll tell you — and suggest alternatives that might work better, such as:
- Installment Agreements — affordable monthly payments
- Currently Not Collectible — pause collections during hardship
- Penalty Abatement — reduce what you owe by removing penalties
- Waiting out the statute of limitations (10 years from assessment)
The right solution depends on your specific circumstances. That's what your free consultation is for.
How the OIC Process Works
Qualification Analysis
We analyze your finances to determine if you qualify and calculate the lowest offer the IRS might accept.
Application Preparation
We prepare and file the required forms (Form 656, Form 433-A/B) with supporting documentation.
IRS Negotiation
We negotiate with the IRS on your behalf, responding to any requests for additional information.
Settlement
Once accepted, you pay the agreed amount and your remaining tax debt is forgiven.
Do You Qualify for an OIC?
Not everyone qualifies for an Offer in Compromise. The IRS considers several factors when evaluating your application:
- Income & Expenses
Your monthly income minus allowable living expenses
- Asset Equity
The value of your property, vehicles, investments, and accounts
- Ability to Pay
Your overall financial picture and ability to pay over time
- Filing Compliance
You must be current on all tax filing requirements
You May Qualify If:
- You can't pay the full amount before the collection statute expires
- You have limited income and assets
- You're experiencing financial hardship
- Your tax debt is creating significant financial burden
Not sure if you qualify?
Get Your Free AssessmentBeware of OIC Scams
You've probably seen TV commercials promising to settle tax debt for "pennies on the dollar." While Offer in Compromise is a real program, not everyone qualifies. Be wary of companies that:
- Guarantee results before reviewing your finances
- Charge large upfront fees with vague promises
- Use high-pressure sales tactics
At New Leaf Tax, we'll give you an honest assessment of whether OIC is right for your situation — and if it's not, we'll recommend better alternatives.
Frequently Asked Questions
Why would the IRS agree to settle for less than what I owe?
Congress created the Offer in Compromise program because it often makes more financial sense for the government to accept a reduced payment than to spend years pursuing a debt that may never be collected in full. The IRS calculates your "Reasonable Collection Potential" — what they could realistically collect from you over the remaining collection period — and if that amount is less than your total debt, accepting an offer for that amount is a smart business decision. Freed from their tax debt, taxpayers become productive contributors again, generating new tax revenue that exceeds what the IRS would have collected through enforcement.
What's the catch with an Offer in Compromise?
The main requirement is that you must stay current and compliant with all tax obligations for five years after your Offer is accepted. That means filing all returns on time and paying all taxes due for five years. If you fall out of compliance during that period, the IRS can revoke your Offer and reinstate the original full debt with all penalties and interest. This is why it's critical to have your withholding and estimated payments set up correctly before an Offer is accepted. We help our clients stay compliant after acceptance to protect their settlement.
What's the lowest amount the IRS has accepted for an Offer in Compromise?
We've negotiated Offers accepted for as little as a few dollars, and we've seen millions in tax debt eliminated through a single successful Offer. But these extreme cases aren't typical — most Offers fall somewhere in between. The IRS uses a specific formula based on your income, expenses, and asset equity to calculate the minimum they'll accept. The key is presenting your financial information accurately and strategically. Every case is different, which is why a thorough analysis before filing is essential. We can run the numbers during your free consultation to give you a realistic estimate of what the IRS would likely accept.
How long does the Offer in Compromise process take?
The IRS typically takes 6 to 12 months to process an Offer in Compromise, though complex cases can take longer. During this time, the IRS is required to suspend most collection activity on your account — which means no new levies or garnishments while your Offer is being considered. This suspension of collections alone can provide significant relief while your case is being evaluated. We keep you informed throughout the process and respond promptly to any IRS requests for additional information.
Can I submit an Offer in Compromise for state tax debt too?
Many states have Offer in Compromise or similar settlement programs, though they vary widely. California's Franchise Tax Board has a program very similar to the federal version, while other states like New York only allow penalties to be compromised through their Offer program. Some states require an approved federal Offer before accepting a state application. We've submitted Offers to state tax authorities across the country and understand the unique requirements of each state's program.
What if my Offer in Compromise is rejected?
If the IRS rejects your Offer, you have 30 days to appeal the decision to the IRS Independent Office of Appeals. Appeals Officers often have a different perspective and broader settlement authority than the examiner who initially reviewed your case. If the appeal is also denied, there may be other resolution options available such as a Currently Not Collectible designation, a partial payment installment agreement, or simply resubmitting a new Offer if your circumstances have changed. A rejection is not the end of the road.
Do I need to be current on all my tax filings before submitting an Offer?
Yes. The IRS requires that all required tax returns are filed before they will process your Offer in Compromise. If you have unfiled tax returns, those must be prepared and submitted first. Additionally, if you're required to make estimated tax payments, you must be current on those as well. We coordinate the entire process — filing delinquent returns, ensuring compliance, and preparing the Offer application — so everything moves forward efficiently.
Find Out If You Qualify
Get a free, no-obligation assessment of your Offer in Compromise eligibility.