Offer in Compromise
An offer in compromise is an agreement in which the IRS accepts less than the full tax debt to settle it. The IRS usually accepts only when the offer equals what it could reasonably collect.
The three grounds are doubt as to collectibility, doubt as to liability and effective tax administration. The taxpayer files Form 656 with Form 433-A (OIC) and a non-refundable application fee unless they meet the low-income test, and must stay compliant for five years after acceptance.
Example. Marco owes $90,000, but his equity in assets plus 12 months of disposable income is $22,000. An offer near $22,000 paid as a lump sum has a realistic chance.
By Binod Raj Singh, CPA (licensed in Montana) · Updated for the 2026-2027 exam windows · Last updated 2026-11-05