Offer in Compromise
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An Offer in Compromise (OIC) can let you settle your tax debt for less than you owe—but it’s not the quick fix that aggressive marketers promise. The IRS accepts offers only for the highest amount it can realistically collect. Contrary to popular belief, OICs aren’t negotiated based on what you’re willing to pay but on detailed financial calculations.
When OIC Makes Sense
Offers in Compromise work best for taxpayers with limited income relative to necessary expenses and few assets with significant equity. The program is particularly appropriate if you genuinely cannot pay your full tax debt due to financial constraints, full payment would make it impossible to afford basic necessities, exceptional circumstances make full collection inequitable, or you believe the underlying tax assessment is incorrect.
How the IRS Evaluates Offers
The IRS uses strict formulas to calculate your ‘reasonable collection potential’—what they could realistically collect over time. This includes your ability to pay based on income minus allowable expenses, equity in assets that could be liquidated, and special circumstances creating economic hardship.
Most offers are rejected because applicants don’t actually qualify—their financial situation shows ability to pay more than offered. Understanding these calculations before applying saves time and application fees.
How I Help with Offers in Compromise
I evaluate your financial situation using the same calculations the IRS will use to determine if you’re a realistic OIC candidate. If you qualify, I prepare your application to present your circumstances in the most favorable light while remaining accurate. If you don’t qualify, I recommend alternative resolution strategies—often installment agreements or currently not collectible status.
For clients who’ve experienced significant financial changes—job loss, disability, business failure—an OIC often provides the best solution, especially when many years remain on the collection statute.
To find out if you qualify for an Offer in Compromise, contact Boss Tax Law for a consultation.