Offer in Compromise (OIC) Guide (2025)

OIC allows settling tax debt for less than the full amount when paying full liability would create financial hardship.

Eligibility

Based on reasonable collection potential (RCP). The IRS evaluates income, assets, expenses, and equity in assets.

Application Steps

  1. Complete Form 656 and Form 433-A (OIC) or 433-F
  2. Submit application fee and initial payment (varies) unless low-income waiver applies
  3. Await IRS review and potential negotiation
  4. If accepted, follow terms to complete payment and close the case

Alternatives

  • Installment agreements
  • Currently Not Collectible status
  • Bankruptcy in limited circumstances