Preparing and Submitting an Offer In Compromise
Learn how to prepare and submit an Offer in Compromise, from eligibility assessment to Form 656, fees, documentation, and IRS review.
Frequently Asked Questions
##### What is an Offer in Compromise (OIC), and how does it work?
##### Who is eligible to apply for an OIC?
##### What types of tax debt can be included in an OIC?
##### How is the OIC amount determined?
##### How do I prepare and submit an OIC?
##### Is there a fee to apply for an OIC?
##### What happens after I submit my OIC application?
##### What are my options if my OIC is accepted?
##### What if my OIC is rejected?
##### Is it advisable to seek professional help when preparing and submitting an OIC?
Preparing and submitting an Offer In Compromise is a complex process that requires careful consideration of your financial situation and adherence to IRS guidelines. If done correctly, it can provide substantial debt relief and a fresh start in managing your tax obligations.
An Offer in Compromise is a program offered by the IRS that allows eligible taxpayers to settle their tax debt for less than the full amount owed. It's designed to help individuals and businesses who are facing financial hardship and cannot afford to pay their entire tax liability.
Eligibility for an OIC is determined by the IRS based on your financial situation. To be eligible, you must demonstrate that paying your tax debt in full would cause financial hardship or be inequitable. The IRS considers factors such as your income, expenses, assets, and future earning potential.
Most types of federal tax debt can be included in an OIC, including income tax, self-employment tax, and certain penalties and interest.
The IRS calculates the OIC amount based on your ability to pay. This involves a comprehensive review of your financial situation, including your income, expenses, assets, and future earning potential. The final offer amount is typically a compromise between what you owe and what you can reasonably pay.
Remember that the OIC process can be complex, and professional assistance can be invaluable in navigating it effectively.
Request a free consultation with our experts today and take the first step towards achieving your goals.
This content was written and reviewed by the licensed tax attorneys at Victory Tax Lawyers, LLP. Our attorneys specialize in IRS tax relief and are licensed members of the California State Bar with a nationwide practice.
Last Reviewed: 2026 · Meet Our Attorneys →
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