How to Get an Offer in Compromise (OIC) Approved with the IRS in 2025
Are you struggling with a tax debt that you can’t pay in full? If so, you might qualify for an Offer in Compromise (OIC) with the IRS, allowing you to settle your tax debt for less than the full amount owed. While OIC approval can be challenging, it’s not impossible—especially if you understand the process and take the right steps to increase your chances.
Many states have similar rules, but this article focuses on the IRS process for federal tax debts. Read on to learn about what an OIC entails, how the IRS determines eligibility, and tips to improve your odds of approval.
What Is an Offer in Compromise (OIC)?
An Offer in Compromise is a legal agreement between a taxpayer and the IRS that settles tax debt for less than what’s owed. To qualify, you must meet one of these conditions:
- Doubt as to Collectibility: Your income and assets are insufficient to pay the debt within the given timeframe.
- Doubt as to Liability: You have valid reasons to believe that the IRS incorrectly assessed your tax debt. This could result from a misinterpretation of tax law or errors made during the assessment.
- Exceptional Circumstances (Effective Tax Administration): Even if you can technically pay the debt, forcing you to do so would cause severe financial hardship or be considered unfair due to extenuating circumstances.
How the IRS Decides to Accept an OIC
Once you’ve submitted your OIC application with the necessary documentation, the IRS evaluates your entire financial situation. They consider:
- Income
- Assets
- Expenses
- Ability to pay
- Proposed settlement amount
It’s important to propose a reasonable settlement amount based on your current financial standing, as the IRS will only approve offers they deem acceptable.
Do You Qualify for an Offer in Compromise?
To qualify for an OIC, you must meet these requirements:
- All required tax returns must be filed.
- You must be current on estimated tax payments for the year you apply.
- You’ve received a bill for the tax debts you want to include in the OIC.
- You cannot be in active bankruptcy proceedings.
- If you are a business owner, all federal tax deposits for the current quarter must be up to date.
How to Submit an Offer in Compromise Application (2025)
Follow these steps to submit an OIC application to the IRS:
- Gather all relevant financial documentation (e.g., bank statements, income reports, asset information).
- Complete IRS Form 433-A (Collection Information Statement for Wage Earners and Self-Employed), attaching any required documentation.
- Complete IRS Form 433-B (for businesses), if applicable.
- Fill out IRS Form 656 (Offer in Compromise), which outlines your proposed settlement offer.
- Submit the application fee and initial payment through the EFTPS or by mail (you may qualify for a fee waiver if you meet Low-Income Certification guidelines).
- Make copies of all forms and supporting documents for your records.
- Mail the original documents to the IRS.
Make sure your initial payment is based on one of the following options:
- Lump-Sum Cash Offer: You pay 20% of the proposed settlement amount upfront. If accepted, you must pay the remaining balance in five or fewer payments.
- Periodic Payment Offer: You commit to paying a set amount each month until the agreed-upon settlement is paid in full.
Tips for Getting Your Offer in Compromise Approved
While the IRS’s OIC acceptance rate is low, there are several ways to improve your chances:
- Review your application for errors: Ensure there are no math mistakes or blank fields.
- Propose a reasonable settlement amount: Unrealistic offers are likely to be rejected.
- Stay current on your tax filings: Be sure that you’re up to date on all required tax returns.
- Avoid accumulating new tax debt: Don’t take on additional tax obligations while your OIC is under review.
- File an appeal promptly: If your OIC is denied, you can appeal using IRS Form 13711.
- Work with a tax professional: Hiring an experienced tax professional can significantly boost your approval odds.
What Happens If Your Offer in Compromise Is Denied?
If your initial OIC is denied, you still have options. You can file an appeal by submitting Form 13711 (Request for Appeal of Offer in Compromise). During the appeal process, the IRS will reconsider your case, but it’s crucial to act quickly and provide any additional documentation that supports your request.
Get Professional Help with Your Offer in Compromise
Submitting an OIC can be a complicated, time-consuming process that requires careful attention to detail. The IRS typically takes 6-12 months to process applications, and they may reject your offer for a variety of reasons. Even after approval, the IRS can retroactively revoke the offer within five years if you fail to comply with future tax obligations.
That’s why working with experienced tax professionals, like those at Larson Tax Relief, can make all the difference. Our team has a proven track record of successfully negotiating OICs with the IRS, saving you time and stress.
About Larson Tax Relief
Founded in 2004, Larson Tax Relief is a family-owned tax resolution firm that has helped thousands of individuals and businesses across the U.S. resolve their tax issues. With an A+ rating from the Better Business Bureau, our team includes federally licensed IRS Enrolled Agents who specialize in negotiating Offers in Compromise.
Our co-founder and president, Jack Larson, is a proud member of the National Association of Enrolled Agents and the National Association of Tax Professionals.
Contact Us for a Free Consultation
If you’re struggling with tax debt and want to explore your eligibility for an OIC, contact Larson Tax Relief today. We’ll guide you through the entire process, from gathering documentation to negotiating with the IRS, ensuring you have the best chance of settling your debt for less than what you owe.