IRS Offer In Compromise FAQ: Common Questions Answered


Updated March 11, 2016


What the IRS Fresh Start Offer in Compromise Program all about?

The IRS Fresh Start Offer in Compromise isn't a new settlement program. but rather gives better guidelines in what you'll have to do to get an Offer in Compromise accepted.


Why would the IRS agree to take less than what I owe?

If an IRS tax debt isn't paid within the first two years, the chances of the IRS getting the money get remote. The IRS knows they can't get blood from a stone and in most cases, the IRS only has ten years to collect on the debt. The IRS understands it may be better to get someone to voluntarily pay you something, as opposed to using enforced collections and getting nothing.


Should I file an Offer in Compromise?

Maybe? I could tell you one thing. Don't rely on the IRS Offer in Compromise calculator to give you the right answer. The IRS rejects Offers in Compromise that the calculator would be accepted (the IRS doesn't have to accept an Offer) and we've had Offer in Compromises accepted that the IRS calculator claimed had no chance.


The best answer to whether or not you should file an Offer in Compromise depends on a lot of factors. Here's an article on some of the myths that could help you out.


Is the program real or is it a scam?

It is real. But yes, a lot of companies have figured out a way to scam people out of money by promising them they'll only pay "pennies on the dollar". Honestly, they are quite obnoxious and the IRS does little to regulate them. Those people they left high and dry may have even qualified for a better deal with the IRS.


Can the IRS take my tax refund after I pay an Offer in Compromise?

Yes, the IRS is allowed to take your refund after your offer in compromise is paid and accepted.


How long does an Offer in Compromise take?

One thing we've learned from working with the IRS…you can't ever expect anything back in a certain window of time. See our article here: Offer in Compromise processing time


What happens to an Offer in Compromise and IRS tax lien?

Once an Offer in Compromise is paid in full, the IRS tax lien that was filed against you will automatically be released. It typically takes about 2 months for this to happen. If the issue is time sensitive, there are other ways to get an lien taken care of.


Where do I find the IRS Offer in Compromise form?

The IRS Offer in Compromise form is right here on the IRS.gov website.


Can I prepare an Offer in Compromise myself?

Yes, you can fill out an Offer in Compromise  yourself. The IRS Offer in Compromise booklet is right here. The IRS Offer in Compromise Manual is right here. The IRS even has an Offer in Compromise video right here. So why not save yourself some money by doing it yourself?


Probably the same reason you don't perform open heart surgery on your cat. Well, unless you don't care too much about your cat, or you happen to be a veterinarian. Getting it wrong can cause you an unbargained-for heartache.


This is the thing. Filling out an Offer in Compromise is not like preparing a 1040. With an Offer in Compromise, the IRS assumes everything you say is not true. Everything you say will be challenged. An Offer in Compromise is an audit of your income, your assets and your lifestyle.


How much should I offer the IRS?

As little as possible that will be accepted.

Technically that is determined by your "Reasonable Collection Potential," or RCP. Your RCP is calculated by what you put down in your IRS Form 656. The real question is what numbers should you put down on this form? That question can only be answered some someone qualified to assist.


What is an IRS Offer and Compromise?

There is no such thing as an IRS Offer and Compromise. It is called an IRS Offer in Compromise.


What are some tips to getting my offer accepted?

One is to be good for 5 years after Offer in Compromise acceptance, otherwise the entire debt will come back. For more tips click here.


What should I do if my Offer in Compromise is rejected?

You have options, you can appeal! Read this article on what to do when your Offer in Compromise is rejected.


Can a running business file an Offer?

Yes. An Offer in Compromise on a running business for back payroll taxes is available but requires the skill of a tax practitioner at the top of his or her game.


Can I file an Offer in Compromise on trust fund taxes?

Yes, you can settle back trust fund recovery penalties with an Offer in Compromise.