What is Offer in Compromise and How Does it Work?


An Offer in Compromise (OIC) is an agreement between the IRS and a person who owes tax debt to the IRS to settle their tax debt for less than the full amount they were originally owed. Anyone who owes tax debt can make the offer, but IRS will only accept the offer from qualified taxpayers who can show proof that they cannot pay the tax debt in full amount. 

The IRS generally approves Offer in Compromises to taxpayers with debt who is able to provide evidence that is based on:

  • The legitimacy of the debt that you owe to the IRS, whether it is the debt is your responsibility or a miscalculation on behalf of the IRS.
  • Your inability to pay for the debt that you owe
  • Paying off the debt would create significant financial hardship

Offer in Compromises is generally one of the better options for tax debtors because it is one of the most forgiving methods to reduce the amount of tax you have to pay instead of simply paying in full with installment plans.

The process of an Offer In Compromise is also very formal and lengthy as the IRS requires a lot of the tax debtor’s paperwork and time with a lot of forms for the application to go through the process. However, the application is only the beginning, as the IRS will require further financial documents of yourself and, if any, spouse or dependents, to fulfill any possible requirement that satisfies the requirement for Offer in Compromise. If the process fails or is denied, the IRS is very likely to accelerate the debt claims they currently have on you while collecting the interests of the debt that was incurred during the application process of the OIC. So it is recommended that unless you are sure that you are likely to have a successful application, asking help from a tax attorney or professional service would be beneficial to increases the likelihood to have your offer accepted by the IRS.

At Republic Tax Relief, our specialists and attorneys may help you negotiate with the IRS to maximize the possible reduction in fees and the debt you might have to pay with our proven methods in dealing with the IRS. Call us at (951) 707-4440 for consultations today.