The objective of the Offer in Compromise (OIC) program is to accept an OIC when it is in the best interest of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements.
If you are unable to pay your tax liability in a lump sum or through an installment agreement and you have exhausted your search for other payment arrangements, you may be a candidate for an offer in compromise.
In order for your offer in compromise to be considered, you must meet the following requirements:
- You are not a debtor in an open bankruptcy proceeding
- Include the $150 application fee, or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment (PDF)
- Submit one of the following payments with the offer:
- Lump Sum Offer- 20 percent payment or a signed From 656-A, Income Certification for Offer in Compromise Application Fee and Payment
- Periodic Payment Offer- The first installment or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment.
Low Income Exemption and Guidelines
The application fee is waived if an individual (not a corporation, partnership or other entity) taxpayer’s income falls at or below IRS Low Income Guidelines. The Form 656-B, Offer in Compromise Booklet (PDF), contains a worksheet titled “IRS Monthly Low Income Guidelines Worksheet” designed to assist taxpayers in determining whether they are eligible for the low income exemption. Qualifying taxpayers are also exempt from making any OIC payments while the offer is being investigated.
Once you have determined that you are eligible for the low income exemption, you must submit Form 656-A, Offer Certification for Offer in Compromise Application Fee and Payment. The Form 656-A must be attached to the Form 656 application and mailed to the IRS for consideration.