An IRS Offer in Compromise may let you settle your tax debt for less than the full amount if you can't pay in full or paying would cause financial hardship. The IRS weighs your income, expenses and asset equity, and generally rejects offers when a payment plan could pay the full balance.
Source: IRS, Offer in Compromise
Our team of Enrolled Agents, CPAs and former state auditors checks whether an offer is realistic before you pay a fee, then prepares and supports the application with you.
Two quick questions. Our team will call you within one business day.
We ask about your balance, income, expenses and assets, and whether all your returns are filed. Then we tell you plainly whether an offer looks realistic or whether another option fits better.
You sign IRS Form 2848 so our Enrolled Agent can pull your IRS transcripts. We then work through the same income and asset calculations the IRS uses on Form 433-A (OIC).
We assemble Form 656, the financial statements and supporting documents, respond to IRS information requests on time, and help with an appeal if the offer is rejected.
| Step | What happens | Key point |
|---|---|---|
| 1 | Apply with the fee and first payment | $205 application fee plus a first payment, unless you meet the low-income qualifications. (IRS) |
| 2 | Eligibility check | If you're not eligible, the IRS returns the application and fee and applies any payment to your debt. (IRS) |
| 3 | Investigation | The IRS may request more information. Answer by the deadline, or the offer may be returned without appeal rights. (IRS, Form 656-B) |
| 4 | During review | Most collection is suspended, the collection period is extended, and a federal tax lien may be filed. Keep making the offer payments. (IRS) |
| 5 | Decision | If the IRS doesn't accept or reject the offer within two years of receiving it, the offer is automatically approved. Time spent in an appeal doesn't count toward the two years. (IRS) |
| 6 | After acceptance | Meet the offer terms in Section 7 of Form 656, including filing and paying on time for five years. Liens are released once the offer is paid in full. (IRS, Form 656-B) |
The IRS considers your income, expenses and asset equity. It generally won't accept an offer if you can pay in full through a payment plan, asset equity, or both. The Form 656 booklet worksheet adds your available asset equity to your remaining monthly income multiplied by 12 (if you pay in five or fewer months) or by 24 (if you pay over 6 to 24 months). (IRS · Form 656-B)
Pay 20% of the offer amount with the application. If the offer is accepted, pay the rest in five or fewer payments. (IRS)
Make the first payment with the application and keep paying monthly while the IRS reviews it. If accepted, continue until the offer is paid in full. (IRS)
Individuals who meet the low-income qualifications don't pay the application fee, initial payment or periodic payments while the offer is reviewed. (IRS)
A payment plan or Currently Not Collectible status may suit you better. If a levy has already started, see stop an IRS wage garnishment or bank levy. (IRS, Temporarily delay collection)
One TRP client reached an Offer in Compromise result of more than $215,000. Results vary.
More detail: Who may qualify for an Offer in Compromise? · Tax resolution services
You may qualify if you can't pay your tax debt in full, or paying would cause financial hardship. You must have filed all required returns, made required estimated payments, and not be in an open bankruptcy. Employers must also have made federal tax deposits for the current and last two quarters.
The IRS looks at your income, expenses and asset equity. The Form 656 booklet worksheet adds your available asset equity to your remaining monthly income multiplied by 12 for offers paid within five months, or by 24 for offers paid over 6 to 24 months. The IRS generally rejects offers if a payment plan could pay in full.
The application fee is $205, plus a first payment: 20% of the offer for a lump sum offer, or the first monthly payment for a periodic offer. Individuals who meet the low-income qualifications don't pay the fee or the payments while the IRS reviews the offer.
The IRS suspends most collection activity, extends the collection period, and may file a notice of federal tax lien. You must keep making your offer payments, but you don't need to make payments on an existing payment plan for the same balance.
You have 30 days from the date of the rejection letter to appeal to the IRS Independent Office of Appeals, using Form 13711 or a written letter. The application fee isn't returned, and any payments are applied to your balance. A payment plan or other option may still be available.
See more answers on our tax relief FAQs page.
Find out whether an offer is realistic for you before you pay an application fee.
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Reviewed by Raman Zoobalan, EA, Co-Founder and Partner · Last updated: October 27, 2026
Tax Resolution Plus Inc. is a private tax resolution firm. We are not affiliated with the IRS or any government agency. This page is general information, not tax advice for your situation. Testimonials and case results reflect the experiences of individual clients. Results vary based on each taxpayer's circumstances.