Offer in Compromise

What Is an Offer in Compromise?

An Offer in Compromise is an agreement that allows an eligible taxpayer to settle an IRS tax liability for less than the full balance owed.

It may be considered when:

• You cannot realistically pay the full tax debt;
• Paying the entire balance would create financial hardship;
• Your income and assets are insufficient to resolve the debt through another payment arrangement; or
• There is a genuine dispute regarding whether some or all of the assessed tax is owed.

Submitting an offer does not guarantee acceptance. The application must be complete, financially supportable, and based on the facts of your case.

Who May Be Eligible?

An Offer in Compromise may be worth evaluating when you:

• Cannot pay the full balance through available income or assets;
• Cannot reasonably resolve the liability through an installment agreement;
• Have experienced unemployment, reduced income, illness, retirement, or business difficulties;
• Would face financial hardship by paying the full amount;
• Have limited disposable income after necessary living expenses; or
• Believe the IRS assessment is incorrect.

Before the IRS will generally consider an offer, required tax returns must be filed and applicable estimated tax payments must be current. Business owners with employees may also need to be current with required federal tax deposits.

Taxpayers in an open bankruptcy proceeding are generally not eligible to submit an Offer in Compromise.

Received an IRS Collection Notice? Take These Steps First

A collection notice should not be ignored, but it also should not lead to a rushed settlement application.

Start by:

1. Confirming the amount and tax periods involved
2. Reviewing the response or payment deadline
3. Checking whether all required tax returns have been filed
4. Gathering current income, expense, asset, and debt records
5. Avoiding unsupported financial disclosures or settlement offers
6. Comparing an OIC with other available IRS resolution options

An Offer in Compromise may be appropriate, but an installment agreement, Currently Not Collectible status, penalty relief, or another collection solution may fit the situation better.

The goal is not simply to submit an offer. The goal is to identify the most supportable resolution strategy.

How IRS Audit Group Approaches an Offer in Compromise

1. We Review the Complete IRS Tax Situation

Our process begins with a structured review of the taxpayer’s IRS account and financial circumstances.

We examine:

• Total IRS balance;
• Tax periods involved;
• Filing compliance;
• Existing collection notices;
• Installment agreements or prior resolution attempts;
• Liens, levies, or Revenue Officer involvement;
• Household or business income;
• Necessary monthly expenses;
• Cash, investments, property, vehicles, and other assets; and
• Circumstances affecting future ability to pay.

This review helps determine whether an OIC is realistic before significant time and money are committed to an application.

2. We Compare the Available Resolution Options

An Offer in Compromise is not automatically the best solution for every taxpayer.

IRS Audit Group compares the OIC route with other possible options, including:

• IRS installment agreements;
• Currently Not Collectible status;
• Penalty abatement;
• Collection appeals;
• Audit reconsideration;
• Liability disputes; and
• Other payment or collection alternatives.

This prevents taxpayers from pursuing a complicated OIC application when another option may provide a more practical path.

3. We Conduct a Detailed Financial Analysis

The IRS does not accept an offer simply because a taxpayer proposes a percentage of the debt.

It assesses the taxpayer’s ability to pay based on factors such as:

• Income;
• Necessary living expenses;
• Equity in assets;
• Bank and investment balances;
• Business assets;
• Future earning capacity; and
• Other relevant financial circumstances.

IRS Audit Group organizes this information and identifies issues that could affect the proposed offer amount.

We also review financial records for inconsistencies that may create questions during the IRS evaluation.

4. We Establish a Supportable Offer Strategy

Once the financial review is complete, we determine:

• The appropriate basis for the offer;
• Whether the available facts support filing;
• What financial documentation will be required;
• What explanations or hardship evidence should accompany the application;
• Which payment option may be appropriate; and
• Whether any compliance issues must be corrected first.

We do not begin with an arbitrary settlement figure. The proposed amount must be connected to the taxpayer’s documented financial position and the applicable IRS analysis.

5. We Prepare and Organize the Application

An Offer in Compromise submission may require extensive financial documentation.

Depending on the case, IRS Audit Group may assist with:

• Form 656;
• Form 433-A (OIC) for individuals and self-employed taxpayers;
• Form 433-B (OIC) for businesses;
• Form 656-L for qualifying liability disputes;
• Income and expense documentation;
• Bank and investment records;
• Property and vehicle information;
• Business financial records;
• Medical or hardship evidence; and
• Written explanations of unusual circumstances.

Our objective is to submit a complete, consistent, and clearly organized application that reduces avoidable delays and unanswered questions.

6. We Represent You During the IRS Review

The IRS may request additional documents, updated financial information, expense explanations, or clarification regarding assets and income.

When authorized to represent you, IRS Audit Group can:

• Communicate with the IRS regarding the application;
• Respond to additional information requests;
• Clarify financial disclosures;
• Address questions concerning income, expenses, or asset values;
• Track deadlines and case developments; and
• Explain what the IRS is requesting before a response is submitted.

This allows the taxpayer to avoid managing complex IRS communications alone.

7. We Review the IRS Decision and Next Steps

If the offer is accepted, we explain the payment and ongoing compliance conditions that must be followed.

If the offer is rejected or returned, we review:

• Why the IRS did not approve it;
• Whether the IRS financial analysis should be challenged;
• Whether additional evidence may help;
• Whether an administrative appeal is appropriate; and
• Whether another resolution option should be pursued.

A rejected offer does not necessarily mean that no solution is available.

What Distinguishes the IRS Audit Group Approach?

Eligibility Before Application

We first determine whether an OIC appears financially and procedurally supportable. We do not treat every tax-debt case as an Offer in Compromise case.

Full Resolution Review

We compare the offer with other IRS collection alternatives rather than viewing the OIC in isolation.

Document-Driven Preparation

The strategy is based on current financial records, asset information, compliance history, and supporting evidence—not an assumed settlement percentage.

Structured IRS Communication

We help manage information requests and deadlines so that responses remain organized, accurate, and consistent.

Continued Support After the Decision

Our involvement does not end when the application is submitted. We review the outcome and explain the next available step.

Why Choose IRS Audit Group?

IRS Audit Group provides:

• Experience handling IRS tax and collection matters;
• Representation for individuals and businesses;
• Careful financial and compliance review;
• Organized preparation of supporting records;
• Direct assistance with IRS communications;
• Clear explanations without unnecessary jargon; and
• Nationwide support from offices in Beverly Hills and Newport Beach, California.

Find Out Whether an Offer in Compromise Fits Your Situation

An Offer in Compromise can provide meaningful relief in the right circumstances. An unsupported or incomplete application, however, can consume valuable time without resolving the underlying tax problem.

IRS Audit Group will review your IRS balance, compliance status, financial position, collection activity, and available resolution options before recommending the next step.

Frequently Asked Questions

Does everyone with IRS tax debt qualify for an OIC?

No. Eligibility depends on filing compliance, income, expenses, assets, ability to pay, and the facts supporting the application.

Does the IRS automatically accept a low settlement amount?

No. The proposed amount must be supported by the taxpayer’s financial circumstances and the IRS evaluation.

Can I apply if I have unfiled tax returns?

Required returns generally need to be filed before the IRS will process an offer.

Can a business apply for an Offer in Compromise?

Yes, but business applications may require additional financial records and compliance with federal tax-deposit requirements.

What happens if the IRS rejects my offer?

A rejected offer may be eligible for an administrative appeal. Another collection alternative may also be available.

Will an accepted offer immediately remove an IRS tax lien?

Not necessarily. Federal tax liens generally remain until the applicable offer terms have been satisfied.