Offer in Compromise - Frequently Asked Questions
General Offer in Compromise (OIC) Information
- How do I know if an offer is right for me?
You can complete the Offer in Compromise Pre-Qualifier Tool to find out if you may qualify for an offer in compromise.
- Do I qualify for the low income certification?
To qualify, your gross monthly household income must be 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. If you qualify you must check the box. If you qualify, you do not have to make any payments toward the offer while the IRS is considering it.
- What are the National and Local Standards, how are they used for an OIC and where can they be found?
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.
- What happens if I do not calculate my offer right or my offer is not high enough?
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.
- Do I need to keep paying my Installment agreement while my offer is being processed?
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.
- Will a lien be filed?
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.
- Can the lien on my account be removed?
The lien will be released if your offer is accepted and the agreed offer amount has been paid in full.
- Can the levy on my account be released?
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.
- When should I file a Doubt as to Liability Offer in Compromise?
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).
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.
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.
Forms and Requirements
- I'm currently in bankruptcy, can I file an offer?
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.
- Do I need to file all required tax returns before submitting an offer?
Yes. Refer to page 1 of Form 656-B, Offer in Compromise, booklet under “Are you Eligible?” An offer cannot be considered if all required tax returns have not been filed.
- Do I need to be up to date with my estimated tax payments before submitting an offer?
Yes. Refer to page 1 of Form 656-B under “Are you Eligible?”
- Do I need to be up to date with my federal tax deposits before submitting an offer?
Yes. Refer to page 1 of Form 656-B under “Are you Eligible?”
- How are estimated tax payments determined?
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.
- How many Forms 656 should be filed, and how many application fees and offer payments must be attached?
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:
- Two taxpayers have separate liabilities
- 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.
- Can I send one offer form to compromise both my business and personal taxes?
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 (refer to #15 above).
Payments and Application Fees
- Where will my payments be applied?
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. In the absence of any written designation request, the IRS will apply the offer payment(s) in the best interest of the government.
- What method of payment does the IRS accept?
A check or money order made payable to the United States Treasury.
- Do I need to send two checks with my offer, one for the application fee and another for the required payments?
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 as the payment amount.
- What if I list all my payments as a deposit on Form 656?
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.
- Can a tax practitioner who represents a number of clients and files multiple OICs combine several application fees into one check?
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.
- After I file my periodic payment offer including the application fee and initial payment, where do I send my future required periodic payments?
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
- Will I get my offer payments back if my offer is not accepted?
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.
- What happens if I paid the initial payment on a periodic payment offer but fail to submit subsequent payments while the offer is under investigation?
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
- My offer was returned, what can I do now?
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.
- My offer was rejected, what options do I have?
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.
- What happens if the IRS accepts my offer in compromise?
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.
- What if my offer was accepted however I did not receive an acceptance letter?
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.
- Where do I send my payments?
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.
- Can I have an extension on offer terms?
Offer terms cannot be extended or changed once the offer is accepted.
- Can I have an extension on offer payments after my offer has been 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.
- Why didn’t I receive my refund?
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 2016 and you are due a refund when you file your 2016 Form 1040 on April 15, 2017, 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.
- Is the refund part of the offer payment?
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.
- Can my future refund be applied toward my offer balance?
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:
Memphis – IRS-MOIC, PO Box 77, Memphis, TN 38118-0077
Brookhaven – IRS-MOIC, PO Box 9006, Holtsville, NY 11742
- Can I add this current year balance into the offer?
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.
- What does it mean that I have to stay in full 'Compliance' to avoid defaulting my accepted offer?
You must comply with all provisions of the internal revenue laws, including timely filing of tax returns and timely tax payments through the fifth year after your offer is accepted (including any extensions).
- Why is the lien still on my credit report and how do I get it removed?
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.
- How long does it take for liens to be released?
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
- I finished making my offer payments, what do I do now?
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.
- What happens if the offer defaults?
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.
- What happens if I do not meet all the terms of my accepted offer in compromise?
The IRS may default the offer in compromise and reinstate the entire tax liability, less all payments and credits received.
- How much interest am I going to pay if my offer in compromise is accepted?
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.