Settle Your Tax Debt for Less
Than You Owe

Offer in Compromise (OIC) lets you settle IRS debt for a fraction of what you owe — but only if you qualify. Here's the truth about OIC and whether it's right for you.

Do I Qualify for OIC?

The Offer in Compromise Reality Check

You've seen the TV ads: "Settle your $100,000 tax debt for only $5,000!" It sounds too good to be true — and usually, it is.

⚠️ The Truth About "Pennies on the Dollar"

The IRS accepts only 25-40% of Offer in Compromise applications. Most people who apply get rejected because they don't actually qualify. The "tax relief mills" you see on TV submit OIC applications for everyone — whether they qualify or not — just to collect fees. Then the client gets rejected and is worse off than when they started.

Who DOES Qualify for Offer in Compromise?

You must prove to the IRS that you cannot pay the full amount — now or in the foreseeable future. The IRS calculates your "reasonable collection potential" (RCP) using:

  • Income: Your current and projected future income (minus allowable living expenses)
  • Assets: Equity in real estate, vehicles, retirement accounts, investments
  • Expenses: Only IRS-approved "necessary" living expenses (not your actual lifestyle)

You're a Good Candidate If:

  • You have little to no equity in assets
  • Your income barely covers basic living expenses
  • You're retired or permanently disabled
  • You have significant medical expenses or other legitimate hardships
  • The tax debt is old and near the 10-year collection statute expiration

Our Offer in Compromise Process

1

Pre-Qualification Analysis

Before we file anything, we run a comprehensive financial analysis to determine if you qualify. We calculate your reasonable collection potential (RCP) using IRS formulas. If you don't qualify, we tell you and recommend the next-best alternative (payment plan, CNC status, etc.). We don't waste your time or money on applications that will be rejected.

2

Complete Financial Documentation

We gather complete financial documentation:

  • 3 months of bank statements (all accounts)
  • Pay stubs, profit/loss statements, income documentation
  • Asset valuations (real estate, vehicles, retirement accounts)
  • Monthly expense documentation (IRS Form 433-A or 433-B)
  • Proof of special circumstances (medical bills, disability, etc.)
3

Prepare & Submit Form 656

We prepare Form 656 (Offer in Compromise) with a complete financial package that presents your case in the best possible light. We calculate the lowest defensible offer amount based on your RCP. We also include a written statement explaining any special circumstances (illness, unemployment, business failure, etc.). The goal: convince the IRS that accepting your offer is in their best interest.

4

Negotiate with IRS

The IRS reviews your OIC (typically 6-9 months). They may request additional documentation or propose a counter-offer. We negotiate on your behalf. If they propose a higher amount, we argue for reductions based on financial constraints, equity issues, or statute limitations. Many OICs are accepted after negotiation even if initially rejected.

5

OIC Accepted — Debt Settled

If the IRS accepts your offer, you pay the agreed-upon amount (either lump sum or short-term payment plan), and the remaining debt is forgiven. You must remain compliant for the next 5 years (file all returns on time, pay all taxes owed). If you comply, the debt is permanently resolved.

Real Result: $87K Settled for $12K

The Problem:

  • Self-employed contractor, $87,000 tax debt
  • Business failed during COVID-19 pandemic
  • Now working hourly job ($45K/year income)
  • No significant assets (renting, 10-year-old vehicle)
  • Medical expenses for chronic condition

Our Strategy:

  • Calculated RCP: Client could only pay $18K over remaining statute period
  • Documented business failure, income reduction, and medical hardship
  • Argued for Doubt as to Collectibility (can't pay full amount)
  • Proposed $12K lump sum offer (based on liquidation value of assets + minimal future income)

The Result:

  • OIC accepted: $12,000 (paid over 6 months)
  • $75,000 forgiven
  • Client debt-free after 6 months
  • Fresh start with manageable finances

Timeline: 8 months from OIC submission to acceptance

Offer in Compromise Questions Answered

What's the success rate for Offer in Compromise?

The IRS accepts approximately 25-40% of OIC applications nationally. However, our acceptance rate is much higher because we only submit applications for clients who genuinely qualify. Many "tax relief companies" submit OICs for everyone just to collect fees, which tanks the overall acceptance rate. We pre-qualify rigorously — if you don't qualify, we tell you upfront and recommend better alternatives.

How much will the IRS accept?

The IRS calculates your Reasonable Collection Potential (RCP) using: (1) equity in assets (fair market value minus liens/loans), plus (2) future income (net monthly income × 12 or 24 months, depending on payment terms). Your offer must equal or exceed your RCP. Example: If you have $5K equity in assets + $200/month disposable income × 12 months = $7,400 RCP. Your minimum offer would be around $7,400. There's no "pennies on the dollar" formula — it's based on your actual financial situation.

How long does the OIC process take?

6-9 months on average, sometimes longer for complex cases. The IRS has backlogs, and OIC applications require thorough financial review. During this time, collection activity is paused (no levies or garnishments). You must continue to file all required returns and pay current taxes while the OIC is pending. If you don't, the IRS will reject your offer.

What happens if my OIC is rejected?

You have 30 days to appeal to the IRS Office of Appeals. We handle the appeal and often get rejected offers reconsidered or accepted on appeal. If the appeal fails, we pivot to the next-best strategy: installment agreement, Currently Not Collectible status, or waiting for the collection statute to expire. A rejected OIC is not the end of the road — it's just one strategy in a larger playbook.

Do I have to pay the offer amount upfront?

You have two payment options: (1) Lump Sum Cash: 20% down with application, balance paid in 5 or fewer payments after acceptance. (2) Periodic Payment: First payment with application, then monthly payments over 6-24 months. The IRS prefers lump sum offers (they're more likely to be accepted), but periodic payment is available if you can't afford lump sum. You must continue making payments while the OIC is under review.

Can I apply for OIC if I'm still in business?

Yes, but it's harder to qualify. The IRS looks at your business's future income potential. If your business is profitable, they'll argue you can pay the full debt over time. You're more likely to qualify if: (1) your business income is minimal or declining, (2) you're transitioning from self-employment to W-2 work, or (3) you're winding down/closing the business. Active, profitable businesses rarely qualify for OIC — payment plans are usually the better option.

Find Out If You Qualify
for Offer in Compromise

We'll analyze your financial situation and tell you honestly whether OIC is right for you — or what strategy is better.

Schedule Your OIC Consultation

📞 Or call: 248-985-8100

Strategic Planning Advisors, LLC

FixIRSTax.com | Tax Resolution Division

Disclaimer:

FixIRSTax | A Division of Strategic Planning Advisors LLC provides IRS resolution services. Information provided on this site is for educational purposes only and does not constitute formal tax, legal, or investment advice. Please consult your advisor before making financial decisions.

Information provided on this site is for educational purposes only and does not constitute formal tax, legal, or investment advice. Please consult your advisor before making financial decisions.

© 2026. Strategic Planning Advisors LLC. All rights reserved.