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Pros and Cons of Pursuing an Offer In Compromise
Explore the pros and cons of pursuing an Offer in Compromise, including debt reduction, fresh start, eligibility challenges, and IRS acceptance risks.
Frequently Asked Questions
An Offer in Compromise can be a valuable tool for those facing insurmountable tax debt, but it's essential to weigh the pros and cons carefully and consider consulting a tax professional to assess whether it's the right option for your specific financial situation.
What is an Offer in Compromise (OIC)?
An Offer in Compromise is an IRS program that allows a qualifying taxpayer to settle a federal tax debt for less than the full amount owed. The IRS bases its decision on your reasonable collection potential — what it could realistically collect from your income and assets — rather than a fixed percentage. It is generally aimed at taxpayers for whom paying the full balance would create a genuine financial hardship.
What are the pros of pursuing an Offer in Compromise?
The main advantage is the possibility of resolving tax debt for less than the full balance, which can free up income and provide a path toward a fresh financial start. While an offer is pending, the IRS generally pauses most collection activity such as new levies. Completing an accepted offer and staying compliant afterward also brings the account current. Whether these benefits apply to your situation depends on your specific finances, so a professional review is worthwhile.
What are the cons of pursuing an Offer in Compromise?
The drawbacks include a demanding application, a nonrefundable application fee and initial payment in most cases, and a review that can take many months. Not every offer is accepted, and a rejection means the underlying debt — plus continued interest and penalties — remains. An accepted offer also comes with a five-year requirement to stay current on filing and paying taxes, and a default can reinstate the original balance. Weighing these trade-offs against your circumstances is something a tax professional can help with.
Who is eligible for an Offer in Compromise?
Eligibility generally requires that you have filed all required tax returns, made any required estimated payments, and are not in an open bankruptcy case. The IRS then weighs your offer against your income, allowable living expenses, and asset equity to gauge your reasonable collection potential. Taxpayers whose finances show they cannot pay the full balance before the collection period ends are the most common candidates. A tax professional can help you assess whether your numbers support an offer before you apply.
How long does it take to process an OIC application?
The processing time can vary, but it often takes several months for the IRS to review and make a decision. Patience is essential during this process.
Can I negotiate with the IRS regarding the OIC amount?
Yes, you can negotiate with the IRS during the OIC process. You may want to work with a tax professional who can help you present a strong case and negotiate effectively.
Is it advisable to seek professional help when pursuing an OIC?
Yes, many individuals find it beneficial to work with tax professionals, such as tax attorneys or enrolled agents, when pursuing an OIC. They can provide expert guidance, ensure your application is complete, and negotiate with the IRS on your behalf.
Remember that the decision to pursue an OIC should be carefully considered in light of your financial situation and goals. Weigh the pros and cons, and consider seeking professional advice to determine the best course of action for your specific circumstances.
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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