• Brian Barto, EA

How to File an Offer-in-Compromise: Lump-Sum Offer

An offer-in-compromise (OIC) is an “offer” to the IRS to settle your tax debt for less than what you owe. A “Lump Sum” Offer is one in which the taxpayer agrees to pay the offered amount within five months of the date of acceptance. Your offer amount will be based on your calculated Reasonable Collection Potential (RCP). Two components will be used to calculate your RCP.

● Net Equity in Assets

● 12 months of Future Income

Click here to read a previous blog post for an explanation of Reasonable Collection Potential.

When filing the Lump Sum Offer, the taxpayer sends in two checks that accompany the Offer (with Form 656):

● One check for $205 for the Offer application fee (the fee as of Apr 27, 2020)

● One check for 20% of the amount offered (for instance, if the taxpayer Offered $10,000, he/she would send in a check for 20% of the amount offered, or $2,000)

Upon acceptance of the Offer, the taxpayer would have 5 months to pay the balance of the amount offered.

In order for a taxpayer to qualify for an Offer-in-Compromise, the taxpayer must be in tax compliance, meaning at least the last 6 years of tax returns must be on file and they must be making their current tax payments. If the taxpayer is not in compliance, the offer will be rejected.

What happens if the IRS deems your offer amount is too low?

If this happens, the IRS will figure the correct offer amount (what they consider to be your reasonable collection potential). If it is more than what you offered, and you have no special circumstances, the IRS will give you an opportunity to increase your offer amount. If you do not, the offer will be rejected. If the IRS finds you can fully pay the liability, you can request an installment agreement.

The IRS also reviews OICs for possible fraudulent intent. Submitting an OIC with false information, or making a false statement to an IRS employee, is considered fraud and may be subject to civil or criminal penalties.

The Offer-in-Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications. You will want to find a tax professional with experience and knowledge in tax debt resolution strategies.

While your offer is being evaluated:

A Notice of Federal Tax Lien may be filed;

Other collection activities are suspended;

The legal assessment and collection period is extended;

You are not required to make payments on an existing installment agreement; and

Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.

If your offer is rejected, you may appeal a rejection within 30 days using Request for Appeal of Offer in Compromise, Form 13711.

At Tax Debt Resolution Services of Winchester VA, our mission is to help you eliminate your IRS issues and the stress the IRS has created in your life and help you get back to doing what you do best! We help our clients in Winchester VA, Strasburg VA, Martinsburg WV and Charles Town WV to resolve their tax debts! If you need assistance please feel free to contact me at 540-662-4432 or

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