Offer in compromise

An offer in compromise (OIC) may allow you to settle your tax debt for less than the full amount you owe if you can’t pay in full or doing so would cause financial hardship. We consider your income, expenses, and asset equity. 

Generally, we won’t accept an offer if you can pay your tax debt in full through a payment plan and/or equity in assets. Before applying, explore other payment options to determine which option is right for you.

How to apply for an OIC

Check your eligibility

Use the Offer in Compromise Pre-Qualifier Tool to check your eligibility and prepare a preliminary offer.

To be eligible, you must:

• File all required tax returns 
• Make required estimated tax payments
• Not be in an open bankruptcy
• If you’re an employer, make required federal tax deposits for the current and last two quarters

Submit your application

You can submit your application for an OIC in your Individual Account. Sign in or create an account to begin. 

Businesses and individuals without an account can download the forms and step-by-step instructions in Form 656-B, Offer in Compromise Booklet PDF. Business taxpayers can make OIC payments through their Business Tax Account or mail payments with their OIC forms.

Every OIC application requires a $205 application fee and a first payment unless you meet the low-income qualifications. 

Make the first payment

Your first payment depends on your offer and payment option you select. You can choose a lump sum payment or periodic payments. If you meet the low-income qualifications, you don’t have to pay the application fee, initial payment, or periodic payments while we review your offer. Only individuals qualify for consideration of the low-income qualification.

Lump sum

Pay 20% of your offer amount when you apply. If accepted, pay the remaining balance in five or fewer payments.

Periodic payment

Make the initial payment when you apply and continue making periodic payments while we consider your offer. If accepted, continue making payments until the offer amount is paid in full.

If you apply and are not eligible, we will return your application and application fee. Your lump sum or periodic payment(s) will be applied to your tax debt.

After you apply

If we confirm your eligibility and process your application:

• You will receive a notification 
• We may request additional information to complete our investigation
• We suspend most collection activities 
• We extend your collection period
• We may file a notice of federal tax lien

You must continue making all required OIC payments during the application process. You do not need to make payments on an existing payment plan for the same balance due. 

Your application will be automatically approved if we do not accept or reject it within two years. This two-year window begins when we receive your application and does not include the time during an appeal. 

If your application is accepted

• You must meet all offer terms in Section 7 of Form 656 to keep your OIC
• We won’t release federal tax liens until your OIC is paid in full
• Some of your offer information will be publicly available in the public inspection file

If your application is rejected

• The application fee will not be returned
• Any payments will be applied to your balance due
• You can appeal your rejected OIC with the IRS Independent Office of Appeals