IRS Offer in Compromise
DIY Step-by-Step Guide(No agent or lawyer)
1) Check Your Eligibility: Use the official IRS Offer in Compromise Pre-Qualifier Tool: https://irs.treasury.gov/oic_pre_qualifier/ Answer questions about income, expenses, assets, and debt. The IRS does not charge to check eligibility.
2) Gather Required Documentation: ● Collect proof of income (W-2s, 1099s, bank statements). ● Gather monthly expense evidence (rent, insurance, transportation). ● Obtain copies of your most recent two federal tax returns.
3) Complete the Official IRS Forms:Individuals: Use Form 656 and Form 433-A (OIC) https://www.irs.gov/forms-pubs/about-form-656Businesses: Use Form 433-B (OIC)https://www.irs.gov/forms-pubs/about-form-433-b
4) Include the Required Fees and Payment:Application Fee: $205 (check or money order payable to the U.S. Treasury).Initial Payment: Lump-Sum Offer (20% of total offer amount) plus Periodic Payment Offer (first month’s payment included with application).
5) Mail Your Application Package To (include all forms, supporting documents, and payments):For Illinois residents:IRS Centralized OIC UnitP.O. Box 30803Philadelphia, PA 19104-9899
6) Wait for Review and Respond Promptly: ● The IRS typically reviews offers within 4–6 months. ● You may be asked to provide updated financial details or verification.● Continue making any agreed payments while your offer is under review.
7) Receive Decision and Next Steps: If accepted - you’ll receive a written confirmation of your settlement amount and payment terms. If rejected - you can appeal within 30 days using Form 13711 (Request for Appeal of Offer in Compromise).
Common Mistakes People Make
● Submitting an offer while missing required tax returns or still in bankruptcy. ● Underreporting income or omitting assets. ● Miscalculating your “reasonable collection potential” (RCP). ● Failing to include the application fee and initial payment. ● Ignoring IRS correspondence during review, leading to case closure.
Documents & Information Needed
● Most recent IRS tax notice or account transcript. ● Taxpayer identification number (SSN, ITIN, or FEIN). ● Proof of income (pay stubs, profit and loss statement, or benefits). ● Monthly expense documentation (rent, utilities, insurance, transportation, etc.). ● Asset details (bank accounts, vehicles, real estate, investments). ● Recent tax returns (at least last 2 years). ● Any previous IRS payment plan or settlement correspondence.
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Agency Founder, Victoria Duchovny