You’ve probably seen ads claiming you can “wipe out your IRS debt for pennies on the dollar.”
Sometimes that’s true—but only for those who truly qualify. Here’s how it really works.
What Is an Offer in Compromise (OIC)?
An Offer in Compromise lets qualified taxpayers settle their IRS debt for less than the full amount owed.
The IRS accepts an offer only when it believes it’s the most it can collect within a reasonable time.
Who Typically Qualifies
You may qualify if:
- Your income barely covers necessary living expenses
- You have little or no asset equity
- Paying in full would cause economic hardship
- You’re current on required filings and estimated taxes
Red Flags & False Promises
Beware of companies that:
- “Guarantee” acceptance before reviewing your finances
- Promise results in days
- Hide fees or file incomplete offers
A weak submission wastes months and can worsen your situation.
At Tax Relief Systems LLC, we submit only realistic, data-based offers—no false promises.
What If You Don’t Qualify
If an OIC isn’t right for you, other relief programs may still help:
- Affordable Installment Agreements
- Penalty Abatement Requests
- Currently Not Collectible status
How Tax Relief Systems LLC Handles OIC Cases
- Full financial analysis before submission
- Transparent recommendations—even if OIC isn’t your best path
- Honest expectations from start to finish
How the IRS Decides What Offer to Accept
The IRS compares your offer to your “reasonable collection potential.” That figure is roughly the equity in your assets (at quick-sale value) plus your future disposable income: your monthly income minus the living expenses the IRS allows under its Collection Financial Standards.
- Lump-sum offers (paid in five or fewer payments) use 12 months of disposable income.
- Periodic payment offers (paid over 6 to 24 months) use 24 months of disposable income.
If your offer is at or above that number, it has a real chance. If it is far below, it will almost certainly be returned or rejected.
What You Need to Submit
- Form 656, Offer in Compromise.
- Form 433-A (OIC) for individuals, or Form 433-B (OIC) for businesses, with proof of income, expenses and assets.
- The application fee and an initial payment: 20% of the offer for a lump-sum offer, or the first proposed payment for a periodic offer. Taxpayers who meet the low-income guidelines are exempt from both.
Before preparing anything, you can run the numbers through the IRS Offer in Compromise Pre-Qualifier tool on IRS.gov.
What Happens While the IRS Reviews Your Offer
- The IRS generally will not levy while the offer is pending, for 30 days after a rejection, and during an appeal.
- The 10-year collection period is paused while the offer is under review.
- You must keep filing and paying current taxes. Missing a return can get the offer returned.
- The IRS may still file a tax lien, which is released once the accepted amount is paid.
After acceptance, the IRS keeps any refund for the year the offer is accepted, and you must stay in compliance for five years or the deal can be reversed. Our Offer in Compromise service covers every step, and if an offer is not realistic we will tell you and look at Currently Not Collectible status or penalty abatement instead.
Frequently Asked Questions
How long does an Offer in Compromise take?
Often several months and sometimes more than a year, depending on the complexity of the case and IRS workload. By law, if the IRS has not made a decision within two years, the offer is treated as accepted.
What if my offer is rejected?
You can appeal within 30 days of the rejection letter by filing Form 13711. An appeal is worth considering when the IRS used the wrong values for your assets, income or expenses.
Is the application fee refundable?
Generally no. The fee and any payments you send with the offer are applied to your tax balance rather than returned.
Can a business settle its tax debt with an Offer in Compromise?
Yes. Businesses use Form 433-B (OIC) to show their finances. Payroll taxes can be included, although owners may also be personally liable for the trust fund portion.
Get Help From Tax Relief Systems
Think you might qualify to settle your IRS debt for less?
Request a free evaluation with Tax Relief Systems LLC today at (877) 807-3133 or info@taxreliefsystemsllc.com
Article written by Richard Lococo.
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