What an Offer in Compromise actually is
An Offer in Compromise (OIC) is an agreement between you and the IRS to settle a tax debt for less than the full amount owed. The commercials call it the Fresh Start program and talk about pennies on the dollar. The reality is more useful and less magical. The IRS accepts an offer when the amount you propose equals or exceeds what it calculates it could collect from you before the collection statute expires. That calculation, called reasonable collection potential, adds the equity in your assets to a multiple of your monthly disposable income, measured against the IRS’s own allowable-expense standards.
That means two things. First, an offer is not a matter of persuasion. If the formula produces a number close to the balance, the offer will be rejected regardless of how well it is argued. Second, the formula can be run in advance. Before we ever prepare an offer, we prepare the same financial analysis the IRS will, and we tell you what the result is likely to be. For many clients the honest answer is that an installment agreement or penalty abatement is the better path. For others, an offer resolves a debt they could never otherwise pay.
A rejected offer is not free. It takes months, requires an application fee and an initial payment (both waived for low-income applicants), and the collection statute is paused while the IRS considers it. Filing one that cannot succeed costs time and money and delays the resolution that would have worked. That is why we will not file an offer we do not believe in.
- Pre-qualification first. We run the IRS formula on your real numbers before you commit to anything.
- Compliance handled. All returns filed and current-year estimated payments made, or the offer is returned unprocessed.
- A complete, defensible financial statement. Form 433-A or 433-B with documentation for every line, because the examiner will ask.
- The right offer type. Lump-sum or periodic payment, doubt as to collectibility or effective tax administration, chosen for your case.
- Follow-through with the examiner. Offers get questions. We answer them, negotiate the valuation and appeal a rejection where the facts support it.
How we prepare an offer
Financial analysis
Income, expenses, assets and debts, measured the way the IRS measures them. The national and local expense standards, the treatment of vehicle equity and retirement accounts, and the collection statute dates on each year all go into the number. We show you the result and explain it.
Compliance and timing
Every required return has to be filed and current-year obligations met before the offer is submitted. Timing matters too: a large asset sale, a new job or a spouse’s income can change the formula, and sometimes it is right to wait a few months.
Preparation, filing and defense
We prepare Form 656 and the financial statement, assemble the documentation, submit the offer with the required payment, and then represent you through the review. The examiner may request more information, dispute a valuation or counter with a higher amount. That back-and-forth is where experience shows.
After acceptance
An accepted offer requires you to stay compliant for five years: file on time and pay on time. A default reinstates the original balance.
Why clients trust us with an offer
We say no when the numbers say no
We would rather lose the engagement than file an offer that fails.
Accountants build better financial statements
The offer lives or dies on Form 433. That is our home ground.
Business offers too
Operating businesses can qualify. The analysis is different and we know it.
In Spanish or English
The formula, the forms and the examiner’s questions, explained in your language.
Offer in Compromise questions
Someone whose equity in assets plus a multiple of monthly disposable income, measured by IRS standards, is less than the balance owed. In plain terms: people who cannot pay the debt in full before the collection statute runs out. Everyone must also be current on filings and not in an open bankruptcy.
Whatever the formula produces, which depends entirely on your finances. It can be a small fraction of the balance for someone with no assets and little income, or close to the full amount for someone with home equity. There is no typical percentage, and anyone quoting one before seeing your numbers is guessing.
Typically six months to a year from submission to decision, sometimes longer. Collection is generally paused while the offer is pending, which is a real benefit during that time.
The IRS charges an application fee and requires an initial payment with the offer, both waived if you meet its low-income certification. Our fee for preparing and representing the offer is quoted in writing after the pre-qualification analysis, so you know the total before deciding.
You have thirty days to appeal to the IRS Independent Office of Appeals, and many rejections are really counteroffers at a higher amount that can be negotiated. If the offer path closes, the financial statement we built is reused for an installment agreement or hardship status, so the work is not wasted.
Yes. The IRS publishes the forms and an online pre-qualifier. Most people who hire us do so because the financial statement is where offers succeed or fail, because a mistake costs months, and because they do not want to negotiate valuations with an examiner alone.