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IRS Offer in Compromise Program: An Option for Struggling Taxpayers

If a taxpayer is unable to pay a tax liability in a lump sum or through an installment agreement and has exhausted the search for other payment arrangements, the taxpayer may be a candidate for an offer in compromise (OIC).

An offer in compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, the IRS will not accept an OIC if the agency believes the liability can be paid in full as a lump sum or through an installment agreement.

OIC's are subject to acceptance based on legal requirements. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

The Form 656 Booklet, Offer in Compromise, contains information and all of the forms necessary to file an OIC.

Information about installment agreement options is available on IRS.gov and is included for taxpayers who do not qualify for an OIC.

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