Offer in Compromise
Tax Settlement Services: IRS Offer in Compromise
Tax settlement services are the work of resolving an IRS balance for less than the full amount, and the Offer in Compromise is the federal program that does it. The IRS accepts a settlement only when it agrees it cannot realistically collect more, so the formulas have to be run before anything is filed. That is the part we do first.
Overview
Offer in Compromise: the essentials.
- IRS form
- Form 656 + 433-A/B
- Application fee
- $205 (waivable if low-income)
- Based on
- Reasonable collection potential
- IRS review
- Several months to ~2 years
The Offer in Compromise (OIC) is the tax debt settlement program most people mean when they ask whether the IRS will take less than they owe. The answer is sometimes yes, but not by goodwill. The IRS accepts an offer when the amount you propose meets or beats your Reasonable Collection Potential, the figure the IRS calculates from your assets plus your future income after allowable living expenses.
We prepare every Offer in Compromise in-house. Our Enrolled Agents, CPAs, and tax attorneys pull your IRS account transcripts, run the reasonable collection potential formula on your actual numbers, and only submit when the math supports acceptance. If your case does not qualify for an OIC, we tell you on the first call and move to the settlement program that does.
How this case usually unfolds
Could not pay the full balance · Offer in Compromise
An OIC case lives or dies on the reasonable collection potential math. We calculate it before filing, the equity in your assets plus future income after allowable expenses, and only submit when the number supports acceptance. When it does not, we say so and move to the settlement program that fits instead.
Sound similar to yours?
No two cases are identical, but patterns repeat. Talk to one of our Enrolled Agents to find out which programs apply to your situation.
Get Free ConsultationWhat tax settlement services actually do
Tax settlement services are professional representation with a narrow job: confirm what the IRS says you owe, test your case against the IRS settlement formulas, and file the program your own numbers support. The IRS has no general discount counter. Settling a balance for less than the full amount happens through one published program, the Offer in Compromise, and every serious tax settlement case is aimed at the eligibility rules behind it.
The work runs in phases. We file Power of Attorney and pull your IRS account transcripts first, so the balance we are working from is the IRS account figure rather than the number on a collection notice. Then your assets, income, and allowable living expenses go through the reasonable collection potential formula. Only after that does anyone talk about filing an offer.
That order is what separates tax settlement companies. A firm that quotes you a settlement before it has seen a transcript is guessing, and a guessed offer amount is the most common reason the IRS rejects one. Our Enrolled Agents, CPAs, and tax attorneys run the numbers first, and if a settlement is not realistic for your case we say so on the first call instead of selling you an application.
How a tax debt settlement works under an Offer in Compromise
A tax debt settlement with the IRS is filed on Form 656 with a detailed financial statement (Form 433-A or 433-B) that documents every asset, source of income, and allowable monthly expense. The IRS uses that packet to calculate your Reasonable Collection Potential, then compares it to the amount you offered. If your offer is at or above that number, the IRS has a formula-based reason to accept.
You choose how to pay an accepted offer: a lump sum (20 percent down, then the balance in five or fewer payments) or a periodic payment plan spread over the remaining months of the collection statute. The IRS charges a $205 application fee and requires the initial payment up front, though low-income applicants can qualify for a waiver of both.
The IRS takes many months to review an Offer in Compromise, and while it is under review the collection statute is paused. We handle every piece of correspondence during that window so a missed IRS request does not sink an otherwise-approvable offer.
The three types of Offer in Compromise
Most offers are the first type below. The other two are narrower, but they matter when the standard collectibility math does not tell the whole story.
Doubt as to Collectibility
The most common OIC. Used when you cannot pay the full balance and the IRS agrees that collecting it in full would leave you unable to cover basic living expenses. Acceptance turns on your reasonable collection potential, not on how much you owe.
Doubt as to Liability
Used when you dispute that you actually owe the assessed amount, for example an audit adjustment that was wrong or a Substitute for Return the IRS filed for you. Here the offer is about the correctness of the debt, not your ability to pay it.
Effective Tax Administration
A rarer offer for cases where you technically could pay, but doing so would be unfair or create economic hardship because of exceptional circumstances such as serious illness or age. You have to show that collecting in full would be inequitable.
Do you qualify for an Offer in Compromise?
Before the IRS will even consider an offer, you have to be current: all required tax returns filed, current-year estimated payments or withholding on track, and not in an open bankruptcy. Those are gate conditions, not the decision itself.
The decision itself is the reasonable collection potential math. The IRS adds the equity in your assets to your future monthly income (after subtracting allowable living expenses under the National and Local Standards), multiplied out over the offer term. If that number is less than the full balance, an Offer in Compromise is realistic. If it is not, a different program will serve you better, and pushing an offer that the formula does not support just wastes the application fee and months of review.
We run this calculation during the investigation phase, before you commit to an offer. You see the number the IRS will see, so there are no surprises when the packet is submitted.
Tax settlement vs. installment agreement vs. Currently Not Collectible
Not every case settles, and the comparison is worth having before you spend months on an application. A tax settlement, when the IRS accepts one, reduces what you owe. An installment agreement pays the full balance over time in amounts you can carry. Currently Not Collectible pauses IRS collection while your income covers only necessities. All three end the collection pressure. Only the first one changes the number.
The dividing line is your reasonable collection potential. If the IRS can see enough equity and disposable income to collect the balance in full before the ten-year collection statute expires, it has no formula-based reason to settle, and an offer filed anyway costs you the application fee and the wait. If it cannot see that, a settlement is genuinely on the table.
Most cases land in one of the four programs below. We tell you which one your numbers point to before you commit to anything.
IRS Installment Agreement
A monthly payment plan that pays the balance over time. The IRS offers several tiers at different income levels, and we negotiate the smallest payment you may qualify for.
Partial Payment Installment Agreement
A monthly plan that does not pay the full balance before the ten-year collection statute expires. The IRS forgives whatever remains when the clock runs out, which makes it the closest cousin to a settlement.
Currently Not Collectible status
The IRS pauses collection entirely when your income barely covers necessities. No garnishment, no levy, while the status holds. The debt stays on the books and is reviewed periodically.
IRS Penalty Abatement
The IRS removes failure-to-file and failure-to-pay penalties (and the interest charged on them) when you have reasonable cause or a clean prior compliance history. On older balances the penalty stack can be a large share of what you owe.
What to check before you hire a tax settlement company
Tax settlement is one of the most heavily advertised corners of the tax industry, and the pitch sounds the same from firm to firm. Three things separate the ones worth calling, and all three are verifiable before you sign anything.
Credentials come first. Only Enrolled Agents, CPAs, and attorneys can represent you before the IRS, and the person who actually works your case should hold one of those credentials rather than being the salesperson who answered the phone. Accreditation comes second. Reviews come third, and the number that matters is the full public count, not the three quotes on a homepage.
Innovative Tax Relief holds an A+ rating with the Better Business Bureau and a 5.0 average across 367 verified Google reviews. Our fees are based on the services required and the complexity of the case, never on a percentage of what the IRS accepts, and they are explained in full before you move forward.
BBB accreditation and IRS credentials
The accreditation page lists our BBB standing and the Enrolled Agent, CPA, and tax attorney credentials on staff. Representation before the IRS is limited to those three.
Verified client reviews
All 367 Google reviews, at a 5.0 average, published without filtering. Several describe settlement cases from intake through the IRS decision.
How much will the IRS settle for
The reasonable collection potential formula in plain English, including what pushes the number up and what pulls it down. Worth reading before any firm quotes you an offer amount.
Federal programs
Nine IRS programs. We look through them all.
Most tax debt is resolved through one of these nine programs. Which one fits depends on your numbers, your filing history, and assessment dates.
Client reviews
What clients say about Offer in Compromise.
5.0 on Google across 383+ verified reviews. A few relevant to Offer in Compromise below; read them all on our reviews page.
Victor and Josh did a good job keeping me in the loop during the negotiation with the IRS
Very professional and thorough review of tax transcripts and IRS account. Tax consultant is very knowledgeable and tax caseworker, very expedient, on follow up and support.
I owed a large amount to the IRS for overdue taxes. Innovative Tax Relief was there to help me through the process. Bill has been a great help explaining each step through the process. I am thankful for this company.
I cannot say enough good about Innovative Tax Relief. They have been very helpful and professional through this entire process. Josh has been a pleasure to work with and always tries to help if I don't understand something. I would highly recommend them to anyone needing help to resolve tax issues.
I was worried at first. I'm not really computer savvy. Pablo Nunez has so much patience with me. Talked to me, clearly explained, and walked me through computer difficulties. I'm not worried, and my stress levels have never been lower. Thank you, everyone at Innovative Tax Relief.
Their. Very. Respectable. They. Solve. My. Issue. With. The. IRS On. How. To. Be. On. The. Rite. Track. With. The. IRS. Payments
Frequently asked
What people ask about Offer in Compromise.
What are tax settlement services?
Is tax settlement the same as an Offer in Compromise?
What is an Offer in Compromise?
How much should I offer the IRS in an Offer in Compromise?
How do you get an Offer in Compromise approved?
Does an Offer in Compromise affect my credit?
How long does an Offer in Compromise take?
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Learn moreNationwide · all 50 states
Offer in Compromise in all 50 states.
IRS representation is federal, so we handle Offer in Compromise for clients in all 50 states, remotely from our West Palm Beach headquarters. Florida is our home base, and we keep dedicated local pages for the metros we serve most.
Florida local pages
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