An Offer in Compromise (OIC) is a formal, written agreement between a taxpayer and the IRS to settle a tax liability for less than the full amount owed. Many states have a similar program. An OIC can be based on “Doubt as to Collectability” (the taxpayer proves he or she is not capable of repaying the debt in full), “Doubt as to Liability” (the taxpayer proves that there is some doubt as to whether the taxes should actually be owed) or “Effective Tax Administration” (typically the taxpayer proves some kind of hardship that warrants a tax settlement).
An Offer in Compromise is a settlement with the Internal Revenue Service (or state taxing authority) for less than the full amount owed. Usually, it is based upon doubt as to collectability (a financial demonstration that you do not have the ability to full pay your tax liability within a reasonable amount of time). The Internal Revenue Service uses a formula to determine an acceptable settlement amount. A cash offer may be made in which the taxpayer pays the settlement amount in full within 5 months of acceptance. Taxpayers who cannot afford to pay the lump sum cash settlement amount within 5 months of acceptance may be eligible for a periodic payment arrangement whereby the settlement amount is paid off with up to 24 monthly payments.
In addition to “Doubt as to Collectability” Offers, Offers may also be approved based on “Doubt as to Liability” (establish that there is some doubt as to whether the taxes should actually be owed) or “Effective Tax Administration” (demonstrate a hardship).
You may be eligible for an Offer in Compromise and not know it. Aggressive government collection agents might not tell you that you are eligible. Or, a seemingly friendly government agent may offer to “help” you prepare and process your own Offer in Compromise. The IRS will then frequently use its own formula against you to either reject your Offer or force you to settle for more than you should.
Our tax attorneys know how to present an Offer in Compromise so that it has the best chance of being accepted. Equally as important, they know when and how to dispute the IRS when rejection of an Offer is recommended. They also know when and how to dispute the settlement amount that the IRS wishes to approve. There have been countless times when our involvement caused the acceptance of Offers that the IRS had attempted to reject. Likewise, there have been countless times when we convinced the IRS to accept a much lower amount than they had demanded.
We love saving our clients as much money as possible and, oftentimes, an Offer in Compromise is the best vehicle for saving BIG dollars. If you are not eligible for an Offer in Compromise, we may be able to help you become eligible. If you are eligible, we will professionally prepare your Offer in Compromise and aggressively negotiate with the appropriate government employee towards the approval of a favorable settlement.
For more information, refer to our article on The IRS Fresh Start Initiative.
Request a Free Consultation from one of our professional tax attorneys.
Resolving your tax debt typically has very little to do with accounting, and everything to do with building and presenting a strong case.
Most CPA’s have very little experience, if any, resolving back taxes. Our attorneys do nothing but resolve back taxes, day in and day out.
Negotiation and persuasive skills, not number-crunching skills, get the best results when it comes to resolving back taxes.
Summary The IRS allows taxpayers to settle their tax debts for less than the full balance through the Offer in Compromise (OIC) program. Net Realizable Equity (NRE) is a key factor in determining eligibility, as it represents the collectible value of assets after discounts and debts. Updated 2025 IRS rules place more emphasis on accurate
Key Takeaways Businesses can settle IRS tax debt for less than the full amount through an In-Business Offer in Compromise (OIC) if the IRS determines the full balance cannot realistically be collected. IRS approval requires full compliance first, including filing all tax returns, staying current on payroll tax deposits, and resolving any Trust Fund Recovery
Summary Currently Not Collectible (CNC) Status is a temporary IRS designation indicating a taxpayer cannot pay their tax debt due to financial hardship. It does not eliminate the debt but delays collection efforts. Eligibility Criteria include demonstrating that your income and necessary living expenses are insufficient to cover your tax liabilities. The IRS may require
