Offer in Compromise - Frequently Asked Questions

On this page:

General Offer in Compromise (OIC) Information
Forms and Requirements
Payments and Application Fees
After the offer has been accepted, rejected or returned

General Offer in Compromise (OIC) Information

You can complete the Offer in Compromise Pre-Qualifier Tool to find out if you may qualify for an offer in compromise.

You qualify if your adjusted gross income (AGI), as determined by your most recently filed income tax return (Form 1040), is less than or equal to the amount shown in the chart on Form 656, Section 1, based on your family size and where you live. Taxpayers who do not qualify based on the AGI may request a waiver based on their current household’s gross monthly income from Form 433 (OIC) x 12.

If you qualify, you are not required to submit any payments of the application fee upon submission or during the consideration of your offer.

The National Standards are the amounts allowed by IRS for food, clothing and other items. You are allowed the total National Standard amounts for your family size and income level, without the IRS questioning the amount you actually spend. Note: Alaska and Hawaii have their own National Standards tables.

The Local Standards are the amounts allowed for housing and utilities and transportation. The Local Standards are limited to the amounts you actually spend per month or the standard amounts, whichever is less. National and local standards are guidelines. If the IRS determines that the standards would not cover basic living expenses in a particular case, then deviations are allowed.

The IRS will figure the correct offer amount. If it is more than what you offered, and you have no special circumstances, the IRS will give you an opportunity to increase your offer amount. If you do not, the offer will be rejected. If the IRS finds you can full pay the liability, you can request an installment agreement.

The IRS reviews OICs for possible fraudulent intent. Submitting an OIC with false information, or making a false statement to an IRS employee, is considered fraud and may be subject to civil or criminal penalties.

No. If you have an installment agreement in place, you do not have to make payments while your offer is being processed. If your offer is not accepted and you have not incurred any additional tax debt, your installment agreement with the IRS will be reinstated with no additional fee. 

During the offer process the IRS may file a Notice of Federal Tax Lien (NFTL). This is a public notice to creditors that you owe a tax debt. However, an NFTL will not normally be filed until a final decision has been made on your offer.

The lien will be released if your offer is accepted and the agreed offer amount has been paid in full.

There is no requirement to release a levy that was served prior to the offer submission. Your circumstances will be considered when determining to release or keep the levy in place while the offer is pending. We may be able to remove the levy if it was placed on your account after the IRS received date of the offer in compromise.

An investigation of your offer may not be completed while there is a pending claim or an open audit of any tax year on which you owe a liability. If you submit a claim requesting relief under innocent spouse provisions, you have been notified a tax year will be audited, or currently have a tax year under audit, we recommend you wait for the resolution of the matter prior to submitting an offer. If we cannot complete investigation of your offer due to a pending examination or claim, the offer may be returned and any payments and application fee submitted will not be refunded.

Prior to filing a Doubt as to Liability Offer in Compromise you should understand the difference between doubt as to liability and doubt as to collectability. Understanding this difference will help you determine which application form is the most appropriate for your situation.

Doubt as to liability is when there is a genuine dispute as to the existence or amount of the correct tax debt under the law. If you have a legitimate doubt that you owe part or all of the tax debt, you will need to complete a Form 656-L, Offer in Compromise (Doubt as to Liability) (PDF).

Doubt as to collectability is when you agree with the amount due, however you are unable to pay the entire amount owed. If you are unable to pay the amount you owe through an installment agreement and/or equity in your assets, complete Form 656- Offer in Compromise located within Form 656-B, Offer in Compromise Booklet (PDF).

Doubt as to Liability Offer in Compromise Helpful Hints:

  • If you agree that you owe the tax but cannot afford to pay do not file a Form 656-L. To request consideration under doubt as to collectability, do not use the Form 656-L.
  • You must provide a written statement explaining why the tax debt or portion of the tax debt is incorrect. In addition, you must provide supporting documentation or evidence that will help the IRS identify the reason(s) you doubt the accuracy of the tax debt.
  • An offer based on doubt as to liability will only be considered for those periods/years identified in the offer.
  • You must offer a dollar amount. An offer of zero will not be considered.
  • Doubt as to liability cannot be considered if the tax debt has been established by a final court decision or judgment.

You may provide additional verification or documentation to support a different valuation to the employee investigating your offer. At any time, you may ask for a telephonic conference with the offer manager to discuss areas of disagreement. Additionally, certain disputes may qualify for Fast Track Mediation which allows for an expedited review of a specific area of disagreement. The mediation is not binding on either party, and certain cases and issues are not eligible. For more information, see Fast Track Mediation.

If you have received the rejection letter, see below: After the offer has been accepted, rejected or returned, Fast Track Mediation does not apply once a rejection letter has been issued.

No. Form 8821 authorizes a third party you designate to inspect and/or receive your confidential information for the type of tax and the years or periods you list on Form 8821. A Form 8821 does not authorize your appointee to speak on your behalf or to otherwise advocate your position before the IRS. Therefore, your appointee cannot represent you in a collection matter, such as an offer in compromise, before the IRS. Use Form 2848, Power of Attorney and Declaration of Representative, to authorize an individual to represent you before the IRS.

Forms and Requirements

No, we are unable to consider an offer while there is an open bankruptcy; once it is discharged and closed, you can file an offer.

You must file all tax returns you are legally required to file for personal or business taxes. If you have a valid extension and have made your required payments, you are considered current for that unfiled return. The extension doesn’t extend the time to pay taxes, only to file the return.

Yes. Refer to page 1 of Form 656-B under “Are you Eligible?”

Yes. Refer to page 1 of Form 656-B under “Are you Eligible?”

Estimated tax payments must equal either 100 percent of your total tax from the prior tax year, or 90 percent of the income tax you expect to owe for the current year. Divide the total by 4 to get your quarterly payment amounts. All estimated tax payments that are due should be paid prior to filing an offer. For more information see Publication 505, Tax Withholding and Estimated Tax.

The number of Forms 656, application fees, and offer payments required are based on the types of taxes you want to compromise. The following number of Forms 656, application fees, and offer payments must be sent with the offer (unless payment is not required because you qualify for the Low Income Certification box in Section 1 of the Form 656 and check the box):

One Form 656 with one application fee and one offer payment if you are compromising either your individual tax liability or two taxpayers owe only joint liabilities. Note: This includes divorced, separated, or married couples living apart if all liabilities are joint and they choose to file a joint offer together.

One Form 656 with one application fee and offer payment if you are compromising either a partnership or corporate liability.

Two separate Forms 656 with two separate application fees and two offer payments if:

  1. Two taxpayers have separate liabilities
  2. Two taxpayers have joint liabilities and one or both also have separate liabilities

Two separate Forms 656, one for the business or corporation liabilities and one for the individual liabilities, when the intent is to compromise both if:

An individual is submitting offers to compromise both individual and corporate liabilities

Note: Either section 1 (Individual Information) OR section 2 (Business Information) should be completed on each Form 656. Both sections should not be combined on one Form 656.

One form may be used if your business is a sole proprietorship linked to your SSN. A separate offer, with application fee and offer payment, is needed if your business is not a sole proprietorship linked to your SSN.

Yes. You will need to gather information about your household's average gross monthly income and actual expenses. The entire household includes all those in addition to yourself who contribute money to pay expenses relating to the household, such as rent, utilities, insurance, groceries, etc. This is necessary for the IRS to accurately evaluate your offer. It may also be used to determine your share of the total household income and expenses.                                 

 

 Payments and Application Fees

You may designate which tax debt you would like to apply your offer payment(s) to in writing when the offer is submitted or when the payment is made. You may not designate the application fee, or any payment after the IRS accepts the offer. In the absence of any written designation request, the IRS will apply the offer payment(s) in the best interest of the government.

A check or money order made payable to the United States Treasury.

You may also make your payment(s) through the Electronic Federal Tax Payment System (EFTPS) .

Select the type of payment:

  • Offer in Compromise - Application Fee
  • Offer in Compromise - 20% Initial payment (Cash Offer)
  • Offer in Compromise - Subsequent Periodic Payment

Yes. You should send two checks, one for the application fee and one for the required offer payment. If only one check is received, the IRS will apply the application fee first and then the remainder toward the required payment amount.

If you do not qualify for the low income certification, or have not checked the low income certification box, the offer will be returned. If you qualify for the low income certification, and have checked the box, the money will be held as a deposit until a decision has been made on your offer.

No. Checks that combine application fees for several offers will not be accepted and the offers will be returned.  Each Form 656 must have separate checks attached.

You will receive a letter that includes Form 656-PPV, Offer in Compromise - Periodic Payment Voucher, which should be completed and attached to the payment.

For offers originally sent to Holtsville, NY, send the payment to: P.O. Box 9011, Holtsville, NY 11742.  For offers originally sent to Memphis, TN, send the payment to: AMC Stop 880, P.O. Box 30834, Memphis, TN 38130-0834.

You may also make your payment(s) through the Electronic Federal Tax Payment System (EFTPS).

Select "Offer in Compromise - Subsequent Periodic Payment".

No. Offer payments that must be sent with the offer are not refundable. If you send MORE than the required amount AND designate the payment as a deposit on Form 656, Offer in Compromise, the payment in excess of the required amount is refundable.

The IRS will try to contact you to provide you with one opportunity to pay the missing amount. If you do not make the payment, the offer will be withdrawn and returned to you without appeal rights. All payment(s) already received will be applied to your tax liabilities. The IRS will also keep the application fee.  

 

After the offer has been accepted, rejected or returned

You should review the letter for the reason(s) your offer was returned. If the reason for the return is later rectified, you may submit a new offer with the application fee and required initial payment.

If you disagree with the rejection, you have 30 days from the date on the rejection letter to appeal by following the instructions in the letter. If you agree with the rejection, you can send full payment of your tax debt to avoid additional interest and penalty, or request an installment agreement to pay your tax debt.

If your offer in compromise is accepted:

  • You must pay the offer amount in accordance with the terms of your acceptance agreement.
  • The IRS will keep any tax refund, including interest due, as the result of an overpayment of any tax or other liability due through the calendar year the IRS accepts your offer in compromise. You may not designate a refund and/or overpayment to be applied to estimated tax payments for the following year. This condition does not apply if the offer in compromise is based on doubt as to liability only.
  • You will waive your right to contest in court or otherwise, the amount of the tax liability.
  • If a Notice of Federal Tax Lien has been filed against you, the IRS will release it when the payment terms of the offer in compromise have been completed.

You must remain in compliance with filing and payment of all tax returns for a period of five years from the date the offer in compromise is accepted, including any extensions. If you do not pay the offer in compromise on time and remain in compliance during the five-year period after the offer in compromise is accepted, including any extensions, your offer will default.

A copy of the acceptance letter is in the offer case file, which has been forwarded to the Federal Records Center. You can request a copy through the Freedom of Information Act by contacting your local IRS office.

Once your offer is accepted all offer payments should be mailed to:  IRS-OIC, PO Box 24015, Fresno, CA 93779 Note: Be sure to include your Offer Number and SSN or EIN on the payment.

You may send overnight payments to: Fresno Service Center, 5045 E. Butler, Stop 31101, Fresno, CA 93888  Note:  Be sure to include your Offer Number and SSN or EIN on the payment.

If you pay with a check or money order, make it payable to the United States Treasury.

You may also make your payment(s) through the Electronic Federal Tax Payment System (EFTPS) .

Select "Offer in Compromise - Accepted Offer"

Offer terms cannot be extended or changed once the offer is accepted.

A one-time extension may be granted on an offer payment within a 24-month period. All subsequent payments must be made timely. Contact the monitoring examiner to request the extension.

As part of the accepted offer agreement the IRS will keep any refund, including interest, for taxes due through the calendar year that the offer was accepted.

For example, if your offer is accepted in 2018 and you are due a refund when you file your 2018 Form 1040 on April 15, 2019, the IRS will apply your refund to your total tax debt. This refund will not be counted as a payment toward your accepted offer amount.

No. The refund that is retained as part of the offer agreement is applied to the overall tax debt and is not considered a payment toward your accepted offer amount.

Your subsequent refunds can be applied to your offer balance with a signed written request.  You may not specify to which tax period the payment should be applied. Both signatures are required on the request if the tax return was filed jointly. Requests may be mailed to the following applicable monitoring site based on where you submitted your initial offer:

  1. Memphis – IRS-MOIC, PO Box 77, Memphis, TN 38118-0077
  2. Brookhaven – IRS-MOIC, PO Box 9006, Holtsville, NY 11742

No. Once your offer is accepted, additional tax balances cannot be added to the offer and must be paid in full or the offer will default. Note:  Installment agreements are not allowed with new balances.

The lien will be released if your offer is accepted and the agreed offer amount has been paid in full. The IRS electronically releases liens to the county where the lien was filed. The county is responsible for release of information to the credit bureaus. Note:  If you need assistance regarding a lien you can call the Centralized Lien Processing External line at 1-800-913-6050.

The timeframe for lien release differs based on the method of payment and is as follows:

  • Cashier Check or Money Order – immediately upon receipt
  • Personal Check or Business Check – 30 days after receipt
  • Debit Card – 100 days after receipt
  • Credit Card – 120 days after receipt

You must continue to file and pay all of your taxes on time for the timeframe noted in the offer contract including any Collateral Agreement signed as part of the accepted offer.

When an offer defaults, the IRS may levy or file suit to collect the entire balance of the offer or an amount equal to the original tax debt less any payment(s) received under the terms of the offer. All penalties and interest will be reinstated. Liens and levies may be placed on the account.

Note: The IRS will not default your agreement when you have filed a joint offer in compromise with a spouse or ex-spouse, as long as you have kept, or are keeping, all the terms of the agreement, even if your spouse or ex-spouse violates the future compliance requirements.

The IRS may default the offer in compromise and reinstate the entire tax liability, less all payments and credits received.

Interest will be added on the tax amount you owe until the offer is accepted. As of the date the offer is accepted no additional interest will be added to your tax debt or accepted offer amount.


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