The offer in compromise process can be lengthy. Keep close track of the dates, the IRS generally has up to 24 months from the date it receives your offer to accept, reject, return or receive your withdrawl of the offer. If the IRS doesn’t make a determination within that period, the offer is deemed accepted. This does not include any appeal period.

Submitting an offer doesn’t guarantee the IRS will accept it. It starts the process of evaluating your situation, your ability to pay, and the amount you’re offering. You can submit an offer for taxes owed individually and for your business. Separate Forms 656 may be required for individual and business liabilities.

Here are the main reasons the IRS may agree to accept less than the full amount you owe:

• Doubt as to Collectibility: This means you don’t have enough income or assets to pay your balance due in full.
• Effective Tax Administration: You can pay all your balance due, but full payment would create an economic hardship, or because of exceptional circumstances, collection would be unfair or inequitable.

Another reason the IRS may accept payment of less than the full amount you owe is doubt as to liability (This means there is a genuine dispute about whether you owe the tax, or whether the amount is correct).

NOTE: You can’t submit an offer if your debt has been established by a final court decision or judgment about the tax or the amount.

• First, review all the other options that might be available to you. Some of these will have lower fees and can be easier and faster to obtain.
• Before submitting an application, you may login to your individual online account to check eligibility, prepare and file an OIC online, and make payments. You can also use the IRS Offer in Compromise Pre-Qualifier Tool to see if you may be eligible and to prepare a preliminary proposal. The tool is only a guide and does not guarantee acceptance. You can still discuss questions you have about filing an offer by contacting the IRS.
• If you submit an offer, you must pay a $205 application fee and make the required minimum payment unless you meet low-income certification guidelines. If you qualify for low-income certification, you don’t have to send the application fee or initial payment, and you don’t have to make monthly payments while the IRS reviews your offer. You will also be required to provide a complete financial statement showing all your assets and income.

This may include digital assets or financial interest in digital assets such as cryptocurrency stablecoins, and NFTs, find out more on digital assets and how this may apply to you.

You can use your individual online account to apply for an OIC, make required initial offer payments (including the application fee) and make payments on an accepted offer. Form 656-B explains other ways you can make payments on an OIC. There are two kinds of payment options for an offer – you must select one of them and include the required payment with your offer unless you meet the low-income certification guidelines. The amount of the first and following payments will depend on the total amount you offer and which payment option you choose.

• Lump Sum Offer: Generally, you’ll be required to pay 20% of the total amount you’re offering when you submit the offer. You’ll need to pay the rest in five or fewer payments, within five or fewer months of the date the IRS accepts the offer.
• Periodic Payment Offer: Generally, you’ll make the first payment when you submit the offer and pay the rest within 24 months, according to the terms of your offer. You must continue making the monthly payments while the IRS considers your offer. If you don’t, the IRS may return your offer with no appeal rights. If you meet low-income certification guidelines, you don’t have to make the initial payment or monthly payments while the IRS reviews your offer. If the IRS accepts your offer, your first payment generally will be due 30 calendar days after acceptance unless another date is agreed to in an amended offer.

For the IRS to accept an offer, you must file all tax returns due and be current with estimated tax payments or withholding. If you have a valid extension for a current year return and have made required payments, you are considered current for that unfiled return. If you own a business and have employees, you must file all returns and be current on all your federal tax deposits for the current and prior two quarters.

NOTE: If you or your business is currently in an open bankruptcy proceeding, you’re not eligible to apply for an offer. Any resolution of your debts generally must take place within the context of your bankruptcy proceeding. Once the bankruptcy is discharged and closed, you may be able to file an offer.

After the IRS notifies you that it has accepted your offer and you pay the reduced amount you’ve agreed to, your entire tax debt is resolved if you fulfill the terms of the offer agreement.

If the IRS rejects your offer, it won’t return the application fee or any other payments you made with the offer. The IRS will apply the non-refundable fee and payments to your tax liability. You have the right to appeal, if the IRS rejects your offer. For more possible outcomes, see the How will this affect me? section below.

• Offer in Compromise (IRS)
• Offer in Compromise Pre-Qualifier
• Offer in Compromise – Frequently Asked Questions
• Need help resolving a tax amount owed or finding the right payment option?
• I Can’t Pay My Taxes 
• Payment Plans (Installment Agreements)
• NTA Blog: IRS Initiates New Favorable Offer In Compromise Policies