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Offer In Compromise

What is an Offer in Compromise?

An Offer in Compromise (OIC) is a formal agreement between a taxpayer and the IRS that allows eligible individuals and businesses to resolve tax debt for less than the full amount owed, if qualifications are met.

The IRS approves an OIC only when it determines that the amount offered reflects the most it can reasonably expect to collect based on your financial situation.

If paying your tax debt in full would create a proven financial strain, or if your assets and income are insufficient to cover the balance, an OIC may be a viable path to resolution.

The IRS considers three legal grounds when reviewing an OIC:

  • Doubt as to Collectability (Most Common): You do not have sufficient income or assets to fully pay your tax debt.
  • Effective Tax Administration: You could technically pay the debt, but doing so would create financial hardship or would be unfair based on your circumstances. These cases are less common and require strong supporting documentation.
  • Doubt as to Liability: There is a legitimate dispute about whether the tax debt is correct.

How Does the IRS Decide if You Qualify for an OIC?

The IRS evaluates your offer using a financial calculation called Reasonable Collection Potential (RCP). RCP represents the total amount the IRS believes it can collect through your available assets (equity) and your future income, after allowable living expenses. To be accepted, your offer must generally meet or exceed this calculated amount.

The IRS reviews three key areas:

Income icon

Income

Expenses icon

Expenses

Asset equity icon

Asset Equity

Important: The IRS does not allow all actual expenses. Many expenses are limited to standardized amounts under IRS Collection Financial Standards.

What Happens if Your Offer in Compromise is Accepted?

Once you complete all payments under the agreed terms:

  • Your tax debt is considered fully resolved
  • The IRS will not pursue the remaining balance
  • You avoid continued collection activity tied to that liability

The final settlement amount reflects your financial capacity—not simply a negotiated discount.

How Optima Tax Relief Can Help with an Offer in Compromise

Optima Tax Relief is a nationally recognized tax resolution firm with a team of tax attorneys, Enrolled Agents, and licensed tax professionals who specialize in IRS Offer in Compromise filings. With over a decade of experience helping taxpayers resolve IRS debt, Optima has assisted clients across the country in navigating the OIC process — from eligibility review and financial disclosure preparation to negotiation and final resolution.

The Offer in Compromise process requires precision. Our team will review your full financial picture, determine whether an OIC is the right resolution strategy for your situation, and guide you through every step of the application. We’ll help you avoid the errors and omissions that most commonly lead to IRS rejection. If an OIC isn’t the right fit, we’ll identify the best resolution option that is.

Get Help with an OIC

Frequently Asked Questions

Offer in Compromise Frequently Asked Questions

How long does the Offer in Compromise process take?
Timelines vary based on your financial situation, documentation, and IRS workload. Many cases take several months to over a year, and some may take longer depending on complexity.
Can I apply for an Offer in Compromise if I have unfiled tax returns?
No. The IRS will not review an OIC application if you have outstanding unfiled returns. You must file all required tax returns before submitting your offer. A qualified tax professional can help you get compliant before you look to submit an Offer in Compromise.
Do I have to stay compliant with the IRS after my Offer in Compromise is accepted?
Yes. After acceptance, you must stay current on all tax filings and payments for five years. If you miss a filing, fail to pay taxes owed, or fall out of compliance during that period, the IRS can default your agreement and reinstate your full original tax liability. Staying compliant after acceptance is just as important as the application itself.
What are the most common reasons the IRS closes or rejects an Offer in Compromise?
The most common reasons include unfiled tax returns, incomplete or inaccurate financial documentation, an offer amount below what the IRS calculates it can reasonably collect, and missing the required application fee or initial payment. Even minor errors can result in rejection. Working with an experienced tax professional helps ensure your application is complete, accurate, and as strong as possible.
When is an Offer in Compromise better than Currently Not Collectible status?
Currently Not Collectible (CNC) status temporarily pauses IRS collection activity, but it doesn’t reduce what you owe — interest and penalties keep accruing. An Offer in Compromise, if approved, actually settles your debt for less. If you have multiple tax years with a long collection statute, an OIC may be a better solution. A tax professional can help you evaluate which option fits your situation.
Do I need a tax professional to apply for an Offer in Compromise?
You’re not legally required to hire one, but the OIC process can be complex. It involves detailed financial disclosures, documentation, and understanding IRS standards and procedures — and errors are one of the top reasons applications are rejected. An experienced tax professional, like the ones at Optima Tax Relief, can help you avoid costly mistakes, present your finances accurately, and improve your chances of approval.
How do I know if a tax relief company is legitimate?
Look for a firm staffed by licensed professionals — tax attorneys, CPAs, or Enrolled Agents — whose credentials you can verify. Check their BBB rating and be cautious of any company that guarantees results or makes promises before reviewing your financial information. A trustworthy firm will be upfront about your options and realistic about what to expect from the start.

Optima Tax Relief, LLC is a tax resolution firm independent from the IRS. This content is made available for informational and educational purposes only. Nothing included in the content should be taken as a guarantee, warranty, prediction, or representation about your specific situation. This content is not intended to be a substitute for professional advice and services. We encourage you to consult with a tax professional to discuss your specific tax matters. Individual results may vary. We do not provide tax, financial, bankruptcy, accounting, or legal advice and nothing contained in this content is intended nor shall be construed as such.

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