If you can’t pay your tax debt in full, or if paying it all will create a financial hardship for you, an offer in compromise (OIC) may be an option. An OIC (also known as an offer) is an agreement between you and the IRS, where the IRS agrees to accept less than the full amount you owe to settle the debt.

This notice or letter may include additional topics that have not yet been covered here. Please check back frequently for updates.

Main reasons the IRS may agree to accept less than the full amount you owe:

• Doubt As to Liability:   You don’t owe the tax or the amount is incorrect.  Use Form 656-L.
• Doubt As to Collectability (DATC):  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 it would create an economic hardship, or would be unfair or inequitable.

How did I get here?

You have a tax balance due and want more information about an OIC. You should 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 the IRS will consider an offer, you must make all required estimated tax payments for the current year, and if you are a business owner with employees, make all required federal tax deposits for the current quarter and the two preceding quarters.

Taxpayers in an open bankruptcy proceeding aren’t eligible to enter into an OIC.

Use the IRS Offer in Compromise Pre-Qualifier Tool to see if you may be eligible to make an offer. This tool is only a guide and does not guarantee acceptance of your offer. You can still discuss questions you have about filing an offer by contacting the IRS.

If you submit an offer, you will be required to pay a filing fee and initial payment unless you meet low-income waiver criteria. You will also be required to provide a complete financial statement showing all your assets and income.

This may include digital assets, find out more on digital assets and how this may apply to you.

The IRS will generally keep any payments made toward the offer (even if your offer is not accepted) and you must remain current with all tax filing and payment obligations throughout the offer process. If your offer is accepted, the IRS will keep any refund you are owed for tax returns filed through the date the IRS accepts your offer.

Submitting an offer will extend the time period the IRS has to collect your tax debt. You can read more about the offer process and find frequently asked questions here.