Offer in Compromise: Settling IRS Debt for Less
An Offer in Compromise (OIC) is an agreement to settle a tax debt for less than the full amount when you cannot reasonably pay it. The IRS compares your offer to your reasonable collection potential: equity in assets plus future disposable income.
Who qualifies
You must have filed all required returns, made required estimated payments, and not be in an open bankruptcy. Approval depends on your finances, not on hardship stories alone.
How it works
- Use the IRS Offer in Compromise Pre-Qualifier to gauge eligibility.
- Submit Form 656 with Form 433-A (OIC) or 433-B (OIC), the application fee, and an initial payment unless you qualify for low income certification.
- Collection is generally paused while the offer is considered.
- If accepted, stay compliant with filing and payment for five years.
Common questions
- Does everyone qualify for an Offer in Compromise?
- No. Many applicants are rejected because their assets or income could pay the debt over time. An honest review up front saves fees and months of waiting.
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Related answers
General information, not tax advice for your specific situation. Last reviewed 2026-10-16.