Who can apply
- You’ve filed all required tax returns and made all required estimated payments.
- You’re not in an open bankruptcy.
- If you’re applying in the current year, you have a valid extension for that year’s return.
How the IRS decides
The IRS compares your offer with your reasonable collection potential: roughly, the equity in your assets plus what you could pay from future income over a set period, after allowable living expenses. If your offer is at least that amount, and that amount is clearly less than what you owe, an offer may make sense. If not, the IRS is likely to reject it.
The IRS’s free Offer in Compromise Pre-Qualifier gives a first read on eligibility.
Fees and payments
| Option | What you pay with the application |
|---|---|
| Lump sum | $205 fee plus 20% of the offer amount; the rest in five or fewer payments after acceptance |
| Periodic payment | $205 fee plus the first proposed payment; continue monthly payments while the IRS reviews |
| Low-income certification | No fee, no initial payment and no monthly payments during review, if you meet the guidelines in Form 656-B |
While your offer is reviewed
- Most collection is suspended, though the IRS may file a federal tax lien.
- The time the IRS has to collect is extended.
- You don’t have to make payments on an existing installment agreement.
- If the IRS doesn’t decide within two years, the offer is treated as accepted.
Our view
An offer is the right answer for some people and a costly detour for many more. We only recommend one when the numbers support it, and we show you those numbers first.