Offer in Compromise (OIC)

An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service (IRS) that settles the taxpayer’s tax liabilities for less than the full amount owed. 

Types of Offer in Compromise (OIC)

There are three types of OIC.  The IRS will consider your OIC if it meets one of the following criteria.

1. Doubt as to Collectibility - Doubt exists that you could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.

2. Doubt as to Liability - A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: the examiner made a mistake interpreting the law, the examiner failed to consider the taxpayer’s evidence or the taxpayer has new evidence.

3. Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, you must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.

OIC Payment Options

There are three payment options for an OIC. 

1. Lump Sum Cash Offer - Payable in non-refundable installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance.  You must submit a non-refundable payment of 20 percent of the offer at the time of filing the OIC.   

2. Short Term Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid within 24 months of the date the IRS received the offer. The first payment must be submitted at the time of filing the OIC.

3. Deferred Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid over the remaining statutory period for collecting the tax. The first payment must be submitted at the time of filing the OIC.

The IRS is not bound by either the offer amount or the terms proposed.  The OIC investigator may negotiate a different offer amount and terms, when appropriate. 

Before the IRS will consider your OIC, you must have filed all required past tax returns, both business and personal.  GoToTaxHelp can help you file these returns prior to submitting your OIC to the IRS.

There is also a $150 application fee which must be paid to the IRS in most cases.  The fee may be waived for low income taxpayers.

Our enrolled agent can help you determine if an OIC is right for you.