How the IRS decides
The IRS calculates your reasonable collection potential. That is the net equity in your assets (home, vehicles, bank accounts, retirement accounts) plus your monthly disposable income, multiplied over a set number of months. If your offer meets that number, it has a good chance. If it falls short, it will usually be rejected, and the fee and any payment you sent are generally not refunded.
Who is a good candidate
- You owe more than you could pay before the IRS collection deadline runs out.
- Your income is modest compared to your balance, or you are facing a long-term hardship.
- You have little equity in assets, or the equity is in property you need to live and work.
- All required tax returns are filed and current-year estimated payments or withholding are up to date.
- You are not in an open bankruptcy case.
Our Offer in Compromise process
- Pull your transcripts and confirm the balance, assessment dates and collection deadlines.
- Calculate your reasonable collection potential using IRS allowable expense standards.
- Tell you honestly whether an offer makes sense, or whether a payment plan or hardship status is the better move.
- Prepare Form 656 with Form 433-A (OIC) or 433-B (OIC) and supporting documents.
- Handle all IRS follow-up, document requests and negotiation until a decision, and appeal if the rejection is wrong.
Payment options. A lump sum offer requires 20% of the offer amount with the application and the rest after acceptance. A periodic payment offer is paid monthly while the IRS reviews it. Low-income taxpayers may qualify to have the fee and initial payment waived.
Reviewed by an Enrolled Agent at IRS Debt-Free ยท Updated September 2026