What is an Offer in Compromise and Do I Qualify For One?
If you owe back taxes and feel overwhelmed by IRS debt, you may qualify for a powerful tax relief tool called an Offer in Compromise (OIC). This IRS program allows taxpayers to settle their tax liabilities for less than the full amount owed. While not everyone qualifies, an accepted Offer in Compromise can be life-changing for those facing serious financial hardship.
At America’s Tax Defender, a leading tax law firm in Tampa, Florida, we help clients across the United States navigate complex IRS issues and pursue meaningful tax relief. Whether you’re an individual struggling with back taxes or a business facing penalties, our experienced tax attorneys can help you explore your eligibility and guide you through the Offer in Compromise process.
What Is an Offer in Compromise?
An Offer in Compromise is an IRS program that allows you to settle tax debt for less than you owe. It’s not a loophole—it’s a legitimate form of IRS tax relief available to those who cannot afford to pay their full tax liability.
The IRS recognizes that collecting the full amount from some taxpayers may be unrealistic. In these cases, it may accept a reduced amount as tax debt settlement, based on the taxpayer’s reasonable collection potential (RCP). This benefits both the IRS and the taxpayer by resolving outstanding debt without prolonged enforcement.
Legal Authority of the Offer in Compromise Program
The Offer in Compromise is grounded in Section 7122 of the Internal Revenue Code, which gives the IRS discretion to accept reduced settlements under specific circumstances. With the right guidance from a tax lawyer, you can submit an offer backed by documentation that shows your inability to pay.
Our Tampa Offer in Compromise lawyers are well-versed in the IRS tax code and know how to construct persuasive offers based on income, assets, and financial hardship.
Types of Offers in Compromise
The IRS considers Offers in Compromise under three categories:
1. Doubt as to Collectibility
This is the most common type. It applies when the IRS believes you will never be able to pay the full tax debt, even over time. If you have little income or assets, this may be the right path for you.
2. Doubt as to Liability
Used when there’s a legitimate dispute about whether the tax debt is correct. If you believe the IRS miscalculated your liability, you can file an Offer in Compromise under this category.
3. Effective Tax Administration (ETA)
This rare type is available if paying your tax debt would create a serious hardship, even if you technically have the ability to pay. Examples include disability, age, or chronic illness.
If you’re unsure which category you may qualify under, a qualified Offer in Compromise attorney at America’s Tax Defender can evaluate your case.
Do I Qualify for an Offer in Compromise?
Qualifying for an Offer in Compromise depends on multiple factors. The IRS wants to see that:
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You are up to date on all required tax filings
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You are current on estimated tax payments (if self-employed)
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You are not in an open bankruptcy proceeding
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You can demonstrate financial hardship or inability to pay
Before submitting an offer, our IRS debt attorneys perform a comprehensive financial analysis to assess your eligibility and likelihood of approval. Many clients come to our Tampa tax law office assuming they qualify, only to find better alternatives like installment agreements or currently not collectible status.
How the IRS Evaluates Your Ability to Pay
The IRS determines your reasonable collection potential (RCP) by looking at:
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Your current and future monthly income and living expenses
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The net realizable value of your assets (bank accounts, real estate, vehicles, investments, retirement accounts, and more)
The total of these values determines whether your offer will be accepted. If your offer is equal to or greater than your RCP, there’s a chance of approval.
When you work with America’s Tax Defender, our team prepares a thorough financial disclosure to present your case in the most favorable light.
IRS Offer in Compromise Pre-Qualifier Tool
The IRS provides a helpful online resource known as the Offer in Compromise Pre-Qualifier Tool to give taxpayers an idea of whether they may be eligible. It asks basic questions about your income, assets, and expenses and gives a preliminary evaluation.
Access the IRS Pre-Qualifier Tool
While useful, this tool does not replace the expertise of a tax settlement lawyer. At America’s Tax Defender, we dig deeper to ensure your offer reflects your true financial picture—and stands a real chance of approval.
How to Apply for an Offer in Compromise
To apply, you must submit:
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IRS Form 656 (Offer in Compromise)
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Form 433-A (OIC) for individuals or 433-B (OIC) for businesses
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$205 application fee (waived for low-income applicants)
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Initial payment based on your selected offer structure
You have two payment options:
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Lump Sum Offer: Pay 20% upfront and the rest within 5 months
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Periodic Payment Offer: Pay initial installment and continue making monthly payments while the IRS reviews your case
Our IRS tax attorneys assist in gathering and organizing all required documents, submitting them accurately, and managing follow-ups with IRS agents.
Common Reasons an Offer Is Rejected
Even strong offers are rejected due to:
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Incomplete or inaccurate financial disclosures
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Unrealistically low offer amounts
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Failure to stay current with tax obligations
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High future income potential
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Errors in form completion
If the IRS rejects your Offer in Compromise, you have the right to appeal within 30 days using Form 13711. We have successfully helped clients reverse denied offers by restructuring their submissions.
Benefits of an Offer in Compromise
If approved, an Offer in Compromise delivers significant benefits:
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Settle IRS debt for less than what you owe
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End wage garnishments, tax liens, and levies
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Rebuild your financial life
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Prevent bankruptcy
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Avoid the mental and emotional toll of IRS enforcement
Risks and Considerations
However, the program also comes with challenges:
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Long wait times (6–12+ months)
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High rejection rate without professional help
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Full compliance required for five years post-approval
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Accepted offers are public record
That’s why many taxpayers choose to work with a trusted Offer in Compromise law firm like America’s Tax Defender to avoid costly mistakes.
Why Hire America’s Tax Defender?
Located in Tampa, FL, America’s Tax Defender proudly represents clients nationwide in Offer in Compromise applications and broader IRS tax resolution services. Our team includes experienced IRS tax attorneys, enrolled agents, and former IRS insiders who understand how to work within the system and defend your rights.
We provide:
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Thorough eligibility screening
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Strategic offer planning
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Complete financial analysis and disclosure preparation
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Professional negotiation with IRS representatives
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Ongoing compliance guidance to protect your agreement
From our Tampa office, we’ve helped individuals, families, and small businesses from California to New York get the tax relief they need through structured legal advocacy.
Is an Offer in Compromise Right for You?
If you’re drowning in IRS debt and need real solutions, now is the time to explore your eligibility for an Offer in Compromise. Don’t wait for the IRS to garnish your wages or levy your accounts. With experienced guidance, you can stop collections and start fresh.
We serve clients nationwide from our Tampa, Florida office, offering virtual consultations and document processing anywhere in the country.
Plan Smart. Prep Right. Defend Strong.
Because every taxpayer deserves a second chance—and every business needs a Tax Defender.
