Offer in a compromise

The Offer in Compromise (OIC) allows taxpayers to settle their tax debt for less than the full amount owed, based on their financial situation. The IRS accepts offers when they believe full payment is unlikely and the offer reasonably reflects the taxpayer’s ability to pay.

Eligibility depends on income, assets, and liabilities, with the IRS calculating a taxpayer’s reasonable collection potential (RCP). If the RCP is low, the IRS may accept an offer that settles the debt for as little than you ow, including potential elimination of penalties and interest.

The process involves submitting detailed financial information to support the offer. While the program can significantly reduce tax debt, it requires careful preparation and often the assistance of a tax professional to ensure the offer meets IRS criteria.