Fact Check: Using Offer in Compromise for Tax Debt Resolution

Last updated on September 26, 2023

If you are considering applying for an Offer in Compromise (OIC) to achieve tax debt resolution, be sure to check the qualifications. After you apply for an Offer in Compromise, the IRS will request information on your income (from all sources), liabilities and assets. The information required can vary depending upon the amount of tax debt. For larger amounts of tax debt, the IRS usually requires the disclosure of extensive financial information.

The IRS has strict qualifying factors in approving a tax debt reduction. Typically, an individual’s financial circumstances have to be extreme in order to be eligible. The standard criteria for judging the financial strength of a taxpayer is that they have the resources to meet basic living needs.

Taxpayers that cannot pay any amount of their tax debt should consider applying for Currently Not Collectible, rather than Offer in Compromise.  The OIC is designed for you to settle your debt for a reduced amount.

The Offer in Compromise is not for everyone. It’s important to note that the IRS penalizes those taxpayers that apply for an OIC when they clearly cannot qualify for it. This is done to discourage individuals who have the means to satisfy their tax debt from requesting a reduction.