OIC Offer In Compromise…what are the odds of getting approved.?
Offer in compromise…what are the odds of getting approved?
I am so stressed about our taxes situation. We currently owe 52k. We havent been able to make any payments because omg the economy right now is not good. We’ve been trying to pay our bills but cant catch up. I called the irs today to make a payment plan & they told us $500 was the minimum for a year & $800 starting the 2nd year until we pay it off. As much as we would like to pay we just cant afford it. We’re behind our bills, we are barely surviving. Ive heard of the offer in comprise. Has anyone done it? What are the odds of getting approved? & what the requirements? Please I need some advice. I cant sleep :
I hear the stress in your message, and you’re not alone—many people in tough financial situations ask about an Offer in Compromise (OIC) as a way to get relief from IRS debt. Here’s a clear breakdown so you know what’s realistic:
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What an Offer in Compromise (OIC) Is
An OIC is essentially a settlement. It lets you pay the IRS less than the full amount you owe if you can prove you’ll never be able to pay the full debt through income or assets.
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What the IRS Looks At
The IRS doesn’t just look at the amount you owe—they look at your reasonable collection potential (RCP). That’s a formula based on:
• Monthly disposable income (after “allowable” living expenses)
• Assets you own (home equity, cars, retirement accounts, etc.)
If your income and assets show you could realistically pay the $52k, they won’t accept. But if you can show you’re essentially insolvent (you can’t catch up, and you don’t have assets to cover it), you may qualify.
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Odds of Approval
• Historically, the IRS accepts about 30–40% of OIC applications.
• Rejections are usually because people overstate hardship or fail to back up their claims with documents.
• If your financials clearly show you cannot pay, your odds are better. If you have equity in assets (like a house or savings), odds are lower.
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Requirements
1. Be current on tax filings (all returns filed, even if unpaid).
2. No active bankruptcy.
3. Submit Form 656 and Form 433-A(OIC) (or 433-B for businesses) with financial proof.
4. Pay the $205 application fee plus an initial offer payment (unless you qualify as low-income, in which case fees can be waived).
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Alternatives If You Don’t Qualify
• Partial Payment Installment Agreement (lower monthly payment than full pay).
• Currently Not Collectible (CNC) Status (IRS pauses collections if you prove you can’t pay).
• Fresh Start Initiative programs (expanded OIC rules and payment plans).
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Practical Steps
1. Run the IRS OIC Pre-Qualifier Tool (on irs.gov). It’s free and gives a ballpark answer.
2. Gather financial documents—pay stubs, bills, mortgage/rent, bank statements, etc.
3. If your numbers are tight and your expenses exceed income, you may have a shot.
4. Consider professional help—companies like US Tax Relief (that’s your business, so I’ll phrase this as a CTA you can use in your blog):
👉 Call US TAX RELIEF at 1-844-4-IRS-FIX or visit www.TaxReliefProgram.org. We’ll walk you through whether you truly qualify for an OIC or if a hardship status like CNC is better for your case.
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✅ Bottom line: The IRS only approves OICs when your ability to pay is clearly far less than your debt. If you’re struggling to keep the lights on, it’s worth exploring. If you own significant assets, the IRS will expect you to tap those first.
Also, let’s go step by step through Form 433-A(OIC) (the financial disclosure the IRS requires for an Offer in Compromise). The way you fill this out and support it with documentation is what makes or breaks approval odds.
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📑 Guide to Filling Out Form 433-A(OIC)
1. Personal Information
• Straightforward: name, SSN, address, dependents.
• Tip: List all dependents you truly support (kids, elderly parents, etc.), because IRS allows expense deductions based on family size.
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2. Employment & Income
• Report your job, employer, and monthly gross income.
• Include all sources: wages, self-employment, side jobs, pensions, Social Security, etc.
• Tip: IRS checks transcripts, so don’t omit income—it will trigger rejection.
• Strategy: Make sure to also report necessary expenses (childcare, insurance, union dues, etc.) so your disposable income looks accurate (and lower).
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3. Expenses (Most Critical Section)
The IRS uses “allowable living expenses” tables (based on your county + family size).
• Rent/Mortgage & Utilities: Allowed up to local standards.
• Food/Clothing/Misc: Allowed by IRS standard, not actual.
• Transportation: They allow a set amount for ownership (car loan/lease) + operating (gas/repairs/insurance).
• Health Insurance/Out-of-Pocket: Allowed if documented.
• Taxes Withheld: Counted as an expense.
👉 Tip: If your actual expenses exceed IRS “allowables,” they’ll adjust downward. So—document every penny with bills, receipts, and statements.
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4. Assets
IRS looks at your equity (value minus debt).
• Cash/Bank Accounts: They want balances as of filing.
• Vehicles: Value = resale minus loan. If no loan, IRS discounts value by 20%.
• Home/Real Estate: Equity is counted (though sometimes discounted if hard to sell).
• Retirement Accounts: Counted, unless penalties make liquidation impractical.
👉 Tip: If assets show you could pay the $52k, the OIC will be denied. If assets are minimal, your case gets stronger.
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5. Calculation of Offer Amount
The IRS formula is basically:
(Quick sale value of assets) + (Monthly disposable income × multiplier)
• If you choose to pay in 5 months or less, multiplier = 12 months of disposable income.
• If you choose to pay in 6–24 months, multiplier = 24 months of disposable income.
👉 Example: If you have $0 assets and only $50/month disposable income:
• Lump-sum option: 50 × 12 = $600 offer.
• Payment plan option: 50 × 24 = $1,200 offer.
That’s why OIC can work if you’re truly strapped.
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6. Documentation Checklist
Attach proof of everything:
• Pay stubs (last 3 months).
• Bank statements (last 3 months).
• Mortgage/rent agreement.
• Utility bills.
• Car loan statements.
• Health insurance bills.
• Credit card/bills if relevant.
👉 Tip: Missing or incomplete documentation = auto-rejection.
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7. Submitting Your OIC
• File with Form 656 + $205 application fee + initial payment (unless you qualify low-income).
• Mail to the IRS OIC unit for your state.
• Expect 6–12 months for a decision. Collections pause while they review.
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✅ Pro Tips to Boost Approval Odds
1. Be conservative, not optimistic—don’t inflate income or understate bills.
2. Use IRS standards—don’t assume they’ll accept your “real” grocery bill if it’s above the table.
3. Consider Currently Not Collectible (CNC) if your numbers are negative—sometimes easier than OIC.
4. Professional packaging helps—the IRS scrutinizes sloppy forms.
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👉 In addition, I’ll go ahead and mock up an example Form 433-A(OIC) filled out with your numbers ($52k owed, behind on bills, no ability to pay $500/month) so you can see how the math works in your case. Remember, this is just a hypothetical example…
Below, let’s run through a sample OIC calculation based on what you told me (owe $52k, can’t afford the IRS $500–800/month payment plan, behind on bills, barely surviving).
I’ll show you exactly how the IRS math works so you can see if an OIC is realistic.
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📊 Step 1: Gather Assumptions (Sample Household Budget)
(this is just an example based on what most families report in your situation)
• Monthly household income (after taxes): $3,200
• Rent/Mortgage: $1,400
• Utilities (electric, water, internet, phone): $400
• Car payment(s): $450
• Gas/repairs/insurance: $350
• Food & household: $900
• Health insurance/out-of-pocket: $300
• Other bills (credit cards, loans, etc.): $300
👉 Total Expenses = $4,100
👉 Monthly Disposable Income = $3,200 – $4,100 = –$900
This means, on paper, you’re operating at a loss each month.
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📊 Step 2: Apply IRS Allowable Standards
The IRS will adjust some numbers using their “standard allowances.” Let’s be conservative:
• Housing/utilities standard (for your county & family size): ~$1,900 allowed (so your $1,800 total counts).
• Food/clothing standard: ~$900 (same as your real number).
• Transportation: Ownership $588 (1 car), Operating $260 → $848 allowed. (your $800 is okay).
• Health: They usually allow documented insurance + necessary out-of-pocket.
👉 After adjustments, your IRS disposable income is still roughly $0 (or close to negative).
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📊 Step 3: Asset Check
• Cash in bank: $100
• Cars: Assume 1 car worth $6,000, loan balance $5,000 → equity $1,000 (IRS discounts 20%, so $800).
• Home equity: Assume renting (so $0).
• Retirement/savings: Assume $0.
👉 Total Assets = about $800.
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📊 Step 4: IRS OIC Formula
Now the IRS uses this formula:
Offer = Asset Equity + (Monthly Disposable Income × Multiplier)
• Disposable Income = $0 (rounded down because you’re negative).
• Lump-Sum OIC (pay in ≤5 months): Multiplier = 12 months. → $0 × 12 = $0
• Payment Plan OIC (6–24 months): Multiplier = 24 months. → $0 × 24 = $0
• Add assets: $800
👉 Offer Amount = $800 (to settle $52,000).
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✅ Bottom Line
Based on these numbers:
• The IRS could potentially accept an OIC around $800–$1,000 to wipe out $52,000 in debt.
• If your income/expenses/assets are close to what we assumed, your odds are pretty good.
• If you have higher income, or equity in a house/retirement, your offer would increase.