Offers in Compromise
An Offer in Compromise (OIC) allows qualifying taxpayers to settle their IRS tax debt for less than the full amount owed. NewPoint Law Group's tax attorneys help Roseville-area individuals and businesses assess their eligibility, prepare a compelling OIC application, and negotiate a resolution that brings finality to outstanding federal tax debt.
Offers in Compromise | Tax Attorneys in Roseville, CA
What Is an Offer in Compromise?
An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS that settles a tax liability for less than the full amount owed. The IRS will accept an OIC when it determines that the taxpayer cannot pay the full liability, or that accepting the offer is in the best interest of both the taxpayer and the government. An accepted OIC provides finality — once accepted and fully paid, the underlying tax debt is resolved.
The IRS evaluates OIC applications based on the taxpayer's ability to pay, income, expenses, and asset equity. Not every taxpayer qualifies, and improperly prepared submissions are frequently rejected.
Grounds for an OIC
Doubt as to Collectibility (DATC): The taxpayer cannot pay the full liability within the remaining collection statute period. This is the most common basis for an OIC.
Doubt as to Liability (DATL): There is genuine doubt about whether the assessed liability is accurate — for example, where the IRS made an error or new evidence has emerged.
Effective Tax Administration (ETA): The taxpayer could technically pay the full liability, but doing so would create economic hardship or be inequitable under the circumstances.
The OIC Application Process
Preparing an OIC requires completing IRS Form 656 (Offer in Compromise), submitting a detailed financial disclosure on Form 433-A (for individuals) or Form 433-B (for businesses), and paying the required application fee and initial payment. The IRS assigns the application to an OIC examiner who reviews the financial information and calculates a Reasonable Collection Potential (RCP) — the baseline for the offer amount.
The process typically takes several months to over a year. During this time, the IRS suspends most collection activity. If the OIC is rejected, the taxpayer has 30 days to appeal to the IRS Independent Office of Appeals.
California Offers in Compromise
California's FTB and CDTFA also have offer-in-compromise programs for state tax liabilities. The California programs have their own eligibility criteria and procedures, and are administered separately from the federal process. Taxpayers with both federal and state tax debt may pursue parallel offers through both agencies.