How Long Does an Offer in Compromise Take?

If you owe back taxes to the IRS, one way to resolve your debt is through an Offer in Compromise (OIC), which allows you to settle for less than the full amount owed. Many taxpayers wonder how long an Offer in Compromise takes, and understanding the timeline is essential before submitting your application. While waiting for a decision, staying responsive to IRS requests and maintaining compliance with ongoing tax obligations can help prevent additional delays or penalties. Furthermore, working with a tax professional can make the process smoother by ensuring all documentation is accurate, deadlines are met, and communication with the IRS is handled efficiently.

At Victory Tax Lawyers, our seasoned tax professionals can help prepare an Offer In Compromise to the IRS. Schedule a free tax attorney consultation today.

This blog explains what an Offer in Compromise is, how to determine if you qualify, how to apply, and the factors that can speed up or delay the process.

What Is the Typical Timeline for an IRS Offer in Compromise?

The typical timeline for an Offer in Compromise (OIC) generally ranges from six to twelve months, although the entire process can take longer depending on the complexity of the case, IRS backlog, and the completeness of the compromise application. The IRS generally approves an OIC when the amount offered represents the most it can expect to collect within a reasonable period of time, based on the taxpayer’s ability to pay, adjusted gross income, assets, and future earning potential. Interest and penalties continue to accrue during the IRS review period, so thorough preparation and accurate documentation are essential to minimizing delays and reducing the remaining balance of income tax debt. Taxpayers who meet the Low-Income Certification guidelines do not have to pay the application fee or initial payment when applying for an OIC, which can make the process more accessible.

The timeline for an OIC involves an initial review, a thorough financial investigation, and a final decision by the IRS. The initial review period after submitting an Offer in Compromise application usually takes about two to four weeks, during which the IRS confirms that Form 656 and supporting financial information have been properly submitted. Taxpayers must provide detailed information about their financial situation, including monthly income, monthly expenses, bank statements, and equity in assets, so the IRS can determine whether the proposed IRS offer, lump sum offer, or installment agreement reflects their true ability to pay. During this stage, the IRS determines whether the proposed payment terms represent a reasonable alternative to ongoing collection efforts and may request additional documentation if questions arise.

After completing its evaluation, the IRS issues either an acceptance letter or a rejection letter. If the IRS accepts the offer, the taxpayer must comply with the agreed payment terms, after which any remaining balance may be forgiven. If the IRS rejects an OIC, the taxpayer has thirty days to request an appeal, which can extend the offer process by several months to over a year, and may involve submitting Form 13711 with additional evidence supporting the taxpayer’s position. Taxpayers should carefully review the rejection letter and may explore other options if the IRS rejects the offer, while also remembering that if the IRS does not decide within twenty-four months, the offer is legally deemed accepted.

What Are the Stages of IRS Processing for an Offer in Compromise?

The Offer in Compromise process begins with the application submission and initial eligibility check, where the IRS reviews your forms to ensure all required information is provided and that you meet basic criteria. Next is the IRS investigation and financial analysis, during which the agency examines your income, expenses, assets, and overall ability to pay. Following this, the IRS moves to offer evaluation and acceptance or rejection, considering whether your proposal is reasonable and aligns with their guidelines. While timelines vary, the initial review can take a few weeks, financial analysis may take several months, and final acceptance or rejection often occurs within six to twelve months of submission.

How Long Does an Offer in Compromise Take and What Factors Affect It?

The processing time for an Offer in Compromise (OIC) can vary depending on several important factors. One key factor is the IRS’s current workload and backlog, which can slow down reviews, especially during busy filing periods or when staff resources are limited. The completeness and accuracy of your submitted documents also affect timing, which can extend the process. The type of offer submitted, whether based on doubt as to liability, doubt as to collectibility, or effective tax administration, also plays a role, as more complex offers require closer review and additional approvals.

Another factor is how quickly the taxpayer responds to IRS requests and maintains communication. Delays can occur if the requested information isn’t provided promptly. Involving a tax attorney or qualified representative can sometimes help speed up the process by ensuring submissions are thorough and by facilitating clearer communication with the IRS. Generally, OIC reviews take six to twelve months, but these variables can make the process shorter or longer depending on the specifics of each case.

How Do IRS Backlog and Staffing Affect Offer in Compromise Processing?

IRS staffing shortages and high workloads can significantly delay the processing of Offers in Compromise. Backlogs mean that applications may sit longer before review, slowing down initial eligibility checks and financial analyses. Current reports show that IRS backlogs have increased in recent years due to reduced staff and higher volumes of returns and inquiries. As a result, taxpayers may experience extended timelines, sometimes adding several months to the typical six- to twelve-month OIC process.

What Steps Should You Take While Waiting for Your Offer in Compromise Decision?

Waiting for an IRS decision on your Offer in Compromise (OIC) can feel stressful, but taking proactive steps can help protect your finances and keep the process moving smoothly. By staying organized, compliant, and responsive, you can reduce potential delays and minimize the risk of additional collection actions.

Step 1: Stay Current with Tax Obligations

Even while your OIC is under review, continue filing all required tax returns and paying any ongoing taxes. Staying compliant demonstrates good faith to the IRS and helps prevent additional penalties or interest from accumulating.

Step 2: Respond Promptly to IRS Requests

If the IRS requests additional information or clarification, provide it as quickly and accurately as possible. Delays in communication can slow down the decision process, so keeping organized records and responding promptly is essential.

Step 3: Monitor for IRS Notices and Communications

Regularly check for any notices or updates from the IRS. Make sure to read them carefully and follow any instructions to avoid missing important deadlines or creating misunderstandings.

Step 4: Consider Alternatives if the Offer Is Delayed or Rejected

If your OIC takes longer than expected or is rejected, it is essential to understand your options. You may be able to appeal the decision, submit a new offer, or explore other IRS programs such as installment agreements.

Step 5: Protect Your Assets from Collection Actions

While waiting for a decision, take steps to prevent wage garnishments, bank levies, or liens. Staying proactive and informed can help safeguard your finances during this period.

By following these steps, you can stay in control and reduce stress while your Offer in Compromise is being reviewed. Remaining compliant, responsive, and prepared ensures you are in the best position to achieve a favorable outcome.

Victory Tax Lawyers OIC Success Framework

• Eligibility Check – Pre-qualify using IRS tools and prior returns.
• Document Collection – Gather pay stubs, bank statements, and monthly expenses.
• Form 656 Submission – Complete application with supporting evidence.
• Payment Strategy – Select lump sum or installment options.
• IRS Negotiation – Respond promptly to follow-up requests and negotiate counteroffers.
• Post-Acceptance Compliance – Follow the payment plan and remain compliant for 5 years.

What Is an Offer in Compromise?

An offer in compromise (OIC) is essentially a debt settlement agreement with the IRS. If you apply and are approved, you can finalize your tax debt by paying less than the amount you owe. However, the IRS generally only approves your offer if one of the following applies:

• You cannot reasonably pay your full tax liability.
• Paying your full tax bill would create economic hardship.
• You have a legitimate doubt that you owe what the IRS says you do

The process of applying for an OIC can be lengthy and complex. However, if you feel trapped by back taxes, an offer in compromise has the potential to change your situation for the better.

How Do You Qualify for an Offer in Compromise?

Not everyone is eligible to apply for an offer in compromise. In addition to meeting the requirements above (you either have a legitimate doubt as to your tax liability, cannot reasonably pay it, or cannot pay it without creating a financial hardship), you also must meet the following basic criteria:

• You have filed all required tax returns.
• You have made all required estimated payments (for self-employed individuals)
• You are not in an open bankruptcy proceeding

The IRS has an online offer in compromise pre-qualifier tool to help guide your decision. However, even if the tool says you aren’t eligible, you may still be able to make a successful OIC. When you file, the IRS will examine your financial information and calculate your Reasonable Collection Potential (RCP), which is how much of your debt the IRS could reasonably expect to collect from you. During this calculation, the IRS will take the following into account:

• Your income and expenses
• Your assets
• Your future earning potential.
• Your other financial obligations (like mortgages, student loans, and child support payments)

The IRS will then use your RCP to decide whether to accept your offer in compromise. If your offer is less than your reasonable collection potential, the IRS may send you a counteroffer or reject your offer altogether. 

How Long Does an Offer in Compromise Take?

Generally, the OIC process takes between 6 and 12 months. Your application will go through several stages. Once you send your OIC application and provide supporting documentation, it usually takes the IRS 2-4 weeks for the initial review. During this time, they will verify that you have filed prior tax returns and made the required estimated tax payments.

If needed, the IRS may ask for more information, including bank statements, proof of income, and proof of expenses. After you have sent additional documentation, reviewing it will usually take 4-6 weeks. When the IRS has all it needs, it will take 6-12 months to conduct a detailed review of your reasonable collection potential. This includes assessing your existing tax liabilities, estimating your future income, and issuing a decision.

It is worth noting that the timeline for an offer in compromise is longer than that of many other solutions. For example, an installment agreement creates a monthly payment plan, and your request will typically be approved or denied within 30 days. According to the IRS Data Book for fiscal year 2024, the IRS received 33,591 Offers in Compromise but accepted just 7,199 of them. This signals an acceptance rate of about 21%, underscoring how critical accurate documentation and eligibility are in securing approval.

Another option is penalty abatement, where you request relief from a penalty because outside circumstances made it impossible for you to pay or otherwise comply with IRS requirements. This can often be resolved over the course of a phone call. Alternatively, you might request that your account be marked as currently not collectible (CNC) because of a current inability to pay. The CNC approval process can take several months, but it’s generally faster than an OIC.

What Factors Impact the OIC Timeline?

Even though the typical OIC process is only up to a year, many factors can extend (and sometimes shorten) that time.

• Complexity of the Case: When you apply for an offer in compromise, you must provide reasonable documentation of your financial situation, and the IRS must review it. Special circumstances and complex situations take longer to review.
• IRS Backlog: The IRS handles an overwhelming amount of paperwork. Depending on when you apply for the offer in the compromise program, it may take several months for an agent to even get to review it.
• Quality of Submission: Even tiny errors might result in a rejection or request for more information. The more thorough and accurate you are, the faster you’re likely to see a response.
• Taxpayer Response Time: You can’t control how quickly the IRS responds to you, but you can control how quickly you respond to them. Always reply or send the requested information as soon as you can.
• Payment Plan Options: How you choose to pay makes a difference when it comes to the timeline. There are two payment plans. If you choose a lump sum payment, you must send 20% of your proposed amount with your application and the rest in five or fewer payments after acceptance. Regarding payment plans, if you want more time to pay, you can choose the periodic payment option. This is when you pay each month for a set period of time, usually up to 24 months.

What Can Delay the OIC Approval Process?

While not all potential delays are within your control, understanding factors that can impact the timeline can give you a better idea of what to expect. With that in mind, these issues can potentially harm your chances of fast approval.

Incomplete Application

Forgetting a document or leaving out critical information can prolong the process for months. This is because the IRS will have to contact you and ask for more information. After you send it in, there’s no guarantee that they will resume the review immediately.

IRS Backlogs

If the IRS is dealing with high case volumes, it may take them a significant amount of time to even review your application. While you can generally expect the IRS to be dealing with some level of backlog, it’s impossible to know just how long it will be when you submit your application.

Complex Financial Situations

When evaluating your application, the IRS must get a clear picture of your finances. The more complex your overall situation is, the longer it takes for them to investigate. Since the IRS has to evaluate your reasonable collection potential before approving or denying your offer, the process may take longer if you have multiple high-value assets that they have to calculate.

Tax Liens

If you already have a tax lien filed against your assets, you may still qualify for an OIC. However, it may complicate negotiations. Tax liens are difficult to remove once they’re in place, and the IRS may take additional time to formally remove a lien even after your offer is accepted.

Inadequate Communication

It’s easy to get a communication from the IRS and say you’ll get to it tomorrow. However, the longer it takes you to respond to the IRS, the longer the OIC process will take. Making an effort to respond to any IRS communication immediately can make a major difference in your case timeline.

5 Steps to Apply for an Offer in Compromise

An OIC can be a great choice if you can’t pay your full tax debt, but the application process is complex, requiring extensive documentation. When you work with a tax professional, you’ll have an advocate who is familiar with all required deadlines and documentation. If you think an OIC is right for you, contact us to set up your free consultation.

1. Pre-Qualification

Before going any further, use the IRS pre-qualifier tool to see if you’re likely to be approved. This tool will ask you basic screening questions (including whether you have filed all required returns and made estimated tax payments) and ask for information on your income, assets, and expenses. It then calculates a quick estimate of your RCP and uses it to determine whether your proposal is reasonable.

2. Gathering Documentation

You will need documentation of your income, debts, basic living expenses, and more. Because you won’t have to take time to locate new documents while preparing your OIC, having everything assembled ahead of time will speed up the process.

3. Submitting Form 656

Form 656 is a form that allows you to better calculate the minimum amount you need to offer in order to be approved. It also outlines the terms of your OIC agreement with the IRS. 

The form will ask you for extensive information, including:

• Basic personal information
• Employment information
• Your personal assets and their values
• Your monthly income and expenses

You will need to attach documentation such as bank statements, pay stubs, or other documentation of earnings, and statements for investment or retirement accounts. Once the form has been completed and all documentation attached, you must mail it to the IRS.

4. Paying the Application Fee

You will need to include a $205 application fee unless you meet the IRS low-income certification guidelines.

5. Decision and Negotiations

Once the IRS evaluates your application, it will either accept it, reject it, or counteroffer. With a counteroffer, the IRS agrees to let you settle, but they ask you to pay more than your original offer. If you wish, you can negotiate further, but this may cause the process to take longer.

What Happens After the OIC Is Accepted or Rejected?

Waiting to hear back from the IRS after applying for an offer in compromise can be nerve-racking. It may be helpful to have a plan for what to do if your application is either approved or denied. According to the IRS Data Book, less than 40% of OIC applications are approved each year due to strict eligibility requirements. On average, taxpayers who qualify and submit a complete application save $10,000-$50,000 in back taxes. IRS backlogs have increased processing times by twenty to thirty percent over the past three years.

After Your OIC Is Approved

Having your OIC application approved is a relief, but to avoid default, it’s crucial to follow the terms of your agreement. If you’ve chosen the periodic payment option, make your monthly payments on time and as agreed, or if you’re paying with a lump sum, send the full amount in five or fewer payments.

Once you’ve paid the full amount, you also must file all tax returns and make all required estimated payments for the next five years. If you have a federal tax lien, the IRS will not release it until all your obligations have been satisfied.

When Your OIC Is Denied

Many more OIC applications are rejected than approved. These are some common rejection reasons:

• You filed for bankruptcy.
• The IRS believes you could pay more.
• Approval is “not in the best interests of the government”, which often means you are believed to be reporting income inaccurately.
• Your offer was initially approved, but you did not file tax returns or make estimated payments afterward

If your OIC is denied, you still have options. If you file an appeal, you must do so within 30 days. While there’s no guarantee that you’ll be approved on appeal, the best way to increase your chances is to work with an experienced tax lawyer.

Case Study: Resolving $38,000 in Back Taxes with an OIC

Jane, a Los Angeles freelancer, owed $38,000 in back taxes due to missed estimated payments. Working with Victory Tax Lawyers, she submitted a complete Offer in Compromise, including income statements, monthly expenses, and asset documentation. Within nine months, the IRS accepted her offer, allowing her to settle her debt for $12,500, avoiding wage garnishment and a federal tax lien.

Can I Speed Up the Offer in Compromise Process?

You may be able to make the OIC process faster, but only up to a certain point. After all, any delays on the part of the IRS are beyond your control. These steps may help make the process more efficient: 

• Submit Complete Paperwork: Ideally, you should send all necessary documentation to the IRS with your application. Make sure to carefully review everything before sending it to ensure you’ve included everything you need to.
• Respond Promptly to IRS Requests: When you immediately respond to any request from the IRS, your quick response time can make the process go much faster.
• Seek Professional Help: Qualified tax professionals can help you put together a complete application and can guide your communications with the IRS. When it comes to working with the IRS, having an attorney is always advisable. This is especially true when making an offer in compromise, which requires a large amount of complex information filed in a particular way.

”In our experience, the key to OIC approval is thorough documentation and proactive communication with the IRS. Missing even small details can add months to the process,” says Parham Khorsandi, Founder of Victory Tax Lawyers. “Taxpayers who respond promptly to IRS inquiries and maintain compliance during review significantly improve their chances of success,” adds Khorsandi.

Offer in Compromise vs Other IRS Tax Relief Options

An OIC may take longer than other relief options like installment agreements or CNC status, but it can save thousands of dollars in back taxes. If approval appears unlikely, taxpayers should carefully assess their financial status and think about other options.

How Can Victory Tax Lawyers Help Expedite Your Offer in Compromise?

Victory Tax Lawyers has extensive experience handling Offers in Compromise, helping clients navigate the complex IRS process with confidence. Their expertise ensures that submissions are complete, accurate, and well-documented, reducing the risk of delays or requests for additional information. By having a knowledgeable attorney represent you, communication with the IRS is more efficient, which can help move your case along faster.

Many clients have successfully resolved their tax debts through OICs with Victory Tax Lawyers, benefiting from the firm’s proven strategies and personalized guidance. Schedule a consultation today to learn how Victory Tax Lawyers can help you achieve a favorable resolution and take control of your tax situation.

Victory Tax Lawyers stand out because of their proven track record, personalized guidance, and hands-on negotiation with IRS agents. Unlike generic tax firms, we handle every step of the Offer in Compromise process, ensuring your documentation is accurate, complete, and presented in a way that maximizes your chance of approval.

When the IRS evaluates your application, having properly prepared forms and supporting evidence can make the difference between acceptance and rejection. We also guide clients on handling situations like a federal tax lien or substantial outstanding tax debt, and we explain the implications of the non-refundable application fee, helping you avoid costly mistakes and unnecessary delays.

Need Help Applying for an Offer in Compromise?

Victory Tax Lawyers differ from generic tax firms by managing every stage of the OIC process, including direct negotiation with IRS agents, detailed financial analysis, and post-acceptance compliance monitoring. Our hands-on approach ensures that applications are complete, accurate, and optimized to maximize approval likelihood.

With over $72 million saved for clients since 2017, Victory Tax Lawyers, a Los Angeles-based tax firm, delivers experienced legal help you can count on to get real IRS solutions. Get the help you deserve. Contact us for a free consultation today!

Frequently Asked Questions

In the process of writing this blog, we encountered some frequently asked questions related to the IRS notice of appointment. We did our best to answer some of them.

Can I Speed up the Offer in Compromise Process?

You can help speed up the process by ensuring your application is complete, accurate, and well-documented. Working with a tax professional can also streamline communication with the IRS and reduce delays.

What Happens if the IRS Takes Longer Than Expected?

If the IRS takes longer than anticipated, your OIC will remain under review until all necessary evaluations are complete. Staying responsive to any requests for information can prevent further delays.

How Am I Notified of the IRS Decision?

The IRS will notify you in writing once a decision is made regarding your Offer in Compromise. This notice will detail whether your offer was accepted, rejected, or requires additional action.

Can I Submit Additional Documents to Speed up Processing?

Yes, providing additional or clarifying documents promptly can help prevent delays. Make sure any extra information is relevant, accurate, and submitted according to IRS instructions.

Legal Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute legal advice. Each taxpayer’s situation is unique. Consult a licensed tax attorney or qualified professional before taking action regarding IRS matters.