Offer in Compromise Attorneys
Experienced legal representation for offer in compromise matters across all 50 states.
About Offer in Compromise
An offer in compromise (OIC) is a formal agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. It is one of the most powerful tools available for tax debt resolution, but it is also one of the most misunderstood and misused. The IRS accepts offers in compromise on three grounds: doubt as to liability (genuine dispute about whether or how much tax is owed), doubt as to collectibility (the taxpayer's assets and income are insufficient to pay the full tax debt), and effective tax administration (the taxpayer can afford to pay but collecting the full amount would create an economic hardship or would be unfair and inequitable).
The vast majority of accepted OICs are based on doubt as to collectibility. The IRS evaluates these offers by calculating the taxpayer's reasonable collection potential (RCP), which considers the net equity in assets plus the taxpayer's future income over the remaining collection period. The IRS will generally accept an offer that equals or exceeds the RCP. This calculation follows specific formulas set out in the Internal Revenue Manual and uses national and local collection financial standards for allowable living expenses. Understanding how the IRS performs this calculation is essential to determining whether an offer is viable and what amount is likely to be accepted.
Filing an offer in compromise requires IRS Form 656, a detailed financial disclosure on Form 433-A (for individuals) or Form 433-B (for businesses), and a $205 application fee unless the taxpayer qualifies for the low-income certification waiver. The taxpayer must also be current on all filing requirements and make the required initial payment — either 20 percent of the lump-sum offer amount or the first monthly installment if choosing periodic payments. The IRS has 24 months to evaluate the offer, during which collection activity is generally suspended. If the IRS does not act within 24 months, the offer is deemed accepted by operation of law.
Why You Need an Offer in Compromise Attorney
The offer in compromise program matters because it provides a realistic path to a fresh start for taxpayers who genuinely cannot afford to pay their full tax liability. Without this option, many taxpayers would face a decade of collection activity — liens on property, levied bank accounts, garnished wages — that prevents them from rebuilding their financial lives and contributing productively to the economy. The IRS has recognized that collecting some amount from taxpayers in financial difficulty is better than collecting nothing over a prolonged enforcement campaign.
However, the OIC program has been surrounded by misleading advertising from so-called tax resolution firms that promise to settle debts for pennies on the dollar regardless of the taxpayer's financial situation. In reality, the IRS rejects approximately 60 percent of submitted offers, often because the taxpayer does not qualify based on their actual financial circumstances. Working with a qualified tax attorney who performs a thorough RCP analysis before filing ensures that you do not waste time and money on an offer that has no realistic chance of acceptance. A skilled attorney can also present your financial situation in the most favorable light within IRS guidelines.
Common Offer in Compromise Cases
Doubt as to Collectibility OIC
Preparing and submitting offers based on the taxpayer's inability to pay the full tax debt, demonstrating that the offer amount equals or exceeds the IRS-calculated reasonable collection potential.
Doubt as to Liability OIC
Challenging the underlying tax assessment when there is a genuine dispute about whether the tax is owed, such as when the IRS filed a substitute for return based on incorrect information.
Effective Tax Administration OIC
Seeking compromise based on exceptional circumstances where the taxpayer can technically afford to pay but collecting the full amount would create an economic hardship or would be unfair.
OIC with Concurrent Collection Defense
Coordinating offer in compromise submission with immediate relief from collection actions such as active levies and liens that threaten the taxpayer's ability to make an offer.
Rejected OIC Appeals
Appealing IRS rejection of an offer in compromise to the IRS Independent Office of Appeals, presenting additional evidence or challenging the IRS's financial analysis.
Post-Acceptance Compliance Monitoring
Ensuring the taxpayer maintains the five-year compliance period required after OIC acceptance, including timely filing and payment of all taxes to prevent default and reinstatement of the original debt.
Typical Offer in Compromise Case Timeline
Financial Analysis & RCP Calculation
2-4 weeksThe attorney reviews your complete financial picture — income, assets, expenses, and debts — and calculates your reasonable collection potential to determine if an OIC is viable and what amount to offer.
Return Compliance & Document Preparation
2-8 weeksAll delinquent tax returns must be filed before submitting the OIC. The attorney prepares Form 656, Form 433-A/B, and all supporting financial documentation.
Offer Submission
1-2 weeksThe completed offer package is submitted to the IRS centralized OIC unit in Memphis, Tennessee (for most individual taxpayers) or Holtsville, New York, along with the application fee and initial payment.
IRS Processing & Review
6-12 monthsAn IRS offer examiner reviews the financial information, may request additional documentation, and may conduct an independent investigation of assets and income.
Negotiation & Decision
1-6 monthsThe attorney negotiates with the IRS examiner on disputed financial items, asset valuations, and expense allowances. The IRS ultimately accepts, rejects, or returns the offer.
Payment & Compliance Period
5 years post-acceptanceAfter acceptance, the taxpayer must pay the agreed amount and remain in full compliance with all filing and payment obligations for five years or the offer defaults.
Know Your Rights
- You have the right to submit an offer in compromise and have it fairly evaluated by the IRS based on your actual financial circumstances.
- You have the right to have the IRS consider your ability to pay, not just the amount of tax owed, when evaluating your offer.
- You have the right to have IRS collection activity suspended during the evaluation of your offer in compromise and for 30 days after rejection.
- You have the right to appeal a rejected offer in compromise to the IRS Independent Office of Appeals within 30 days of the rejection.
- You have the right to a low-income fee waiver if your income is at or below 250 percent of the federal poverty level.
- You have the right to have your offer deemed accepted if the IRS fails to make a decision within 24 months of submission.
- You have the right to withdraw your offer at any time before the IRS accepts it.
What to Look for in an Offer in Compromise Attorney
When selecting an attorney for an offer in compromise, look for someone who performs a detailed financial analysis before recommending the OIC route. An ethical attorney will tell you upfront whether you are likely to qualify and what offer amount the IRS is likely to accept — this requires running the RCP calculation using your actual financial data. Be wary of any firm that guarantees acceptance or promises a specific settlement amount before reviewing your finances.
Experience matters significantly in OIC cases. Ask the attorney how many offers they have submitted, what their acceptance rate is, and how their rate compares to the national average. An experienced OIC attorney understands how to properly value assets, apply allowable expense standards, account for dissipated assets, and present financial information in the format the IRS expects. They should also be able to advise you on timing — sometimes waiting for certain circumstances to change, or pursuing penalty abatement first, can improve the OIC outcome. Finally, ensure the attorney will handle post-acceptance compliance requirements.
Questions to Ask Your Offer in Compromise Attorney
- 1Based on my financial situation, what is my reasonable collection potential, and what offer amount do you recommend?
- 2What is your offer in compromise acceptance rate, and how does it compare to the national average?
- 3Do I need to file any delinquent returns before we can submit the offer, and can your firm handle those?
- 4How will you handle disputed asset valuations and expense allowances with the IRS examiner?
- 5What happens to the tax lien on my property if the offer is accepted?
- 6What are my obligations during the five-year compliance period after acceptance, and what happens if I fall behind?
- 7If the offer is rejected, what are the alternative resolution options — installment agreement, CNC status, or litigation?
Understanding Offer in Compromise Legal Costs
Attorney fees for offer in compromise representation typically range from $3,500 to $7,500 for the preparation and submission phase. This generally includes the financial analysis, RCP calculation, return compliance coordination, document preparation, and initial submission. If the IRS requests additional information or the offer requires negotiation with the examiner, additional fees of $1,500 to $3,000 are common. If the offer is rejected and appealed, appeals representation typically costs an additional $2,000 to $5,000. The IRS charges a $205 application fee (waived for taxpayers with income at or below 250 percent of the federal poverty level) and requires an initial payment of 20 percent for lump-sum offers or the first monthly payment for periodic offers. Many tax resolution firms offer payment plans for their fees.
Key Legal Terms
Video Resources
These videos are provided for informational purposes only. The attorneys and organizations featured are not affiliated with or endorsed by Northwind Law.
Offer in Compromise Explained by Former IRS Agent
Help From A Former IRS Agent
How Much Should You Offer the IRS?
The Tax Couple
IRS Offer in Compromise: The Truth About Settling Tax Debt
CNBC
Frequently Asked Questions About Offer in Compromise
Citations & Sources
- [1]In fiscal year 2023, the IRS accepted 17,890 offers in compromise totaling $289.4 million in tax liability resolution. — IRS Data Book 2023
- [2]The IRS evaluates offers in compromise by calculating the taxpayer's reasonable collection potential, which includes net equity in assets plus projected future income over the remaining statutory collection period. — IRS Internal Revenue Manual 5.8.4
- [3]If the IRS does not make a determination on an offer in compromise within 24 months of the date it was submitted, the offer is deemed accepted under IRC Section 7122(f). — IRC Section 7122(f)
- [4]The application fee for an offer in compromise is $205, waived for taxpayers whose income falls at or below 250 percent of the poverty level as published by the Department of Health and Human Services. — IRS Form 656 Booklet
Ready to Discuss Your Offer in Compromise Case?
Speak with an experienced offer in compromise attorney. Free consultations available.