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An Offer in Compromise (OIC) is a program authorized under Internal Revenue Code §7122 that allows certain taxpayers to resolve federal tax liabilities for less than the full amount owed when specific conditions are met.
Not all taxpayers qualify. The IRS evaluates each application based on financial information, compliance history, and ability to pay.
The IRS may consider an OIC in the following circumstances:
• Doubt as to Collectibility – When the taxpayer’s assets and income are insufficient to pay the full tax debt.
• Effective Tax Administration – When full collection would create economic hardship or be inequitable.
• Doubt as to Liability – When there is a legitimate dispute regarding the amount owed.
Eligibility depends on detailed financial analysis and documentation.
If an Offer in Compromise is accepted:
• The taxpayer resolves the qualifying tax debt for the agreed amount
• Collection actions are suspended during review
• Federal tax liens may be released once the agreed-upon amount is paid and the terms are satisfied
Acceptance is not guaranteed, and strict compliance with IRS requirements is necessary.
The IRS calculates “Reasonable Collection Potential” (RCP), which considers:
• Net realizable value of assets
• Monthly disposable income
• Allowable living expenses
• Future earning capacity
Forms commonly used in the OIC process include:
• IRS Form 656
• IRS Form 433-A (Individuals)
• IRS Form 433-B (Businesses)
• IRS Form 656-L (Doubt as to Liability cases)
The IRS also provides an online pre-qualifier tool to help estimate potential eligibility.
Submitting inaccurate financial information or omitting required disclosures can result in rejection of the application and potential enforcement consequences. For that reason, careful preparation and documentation are important.
Each case must be evaluated based on its specific facts.
Tenina Law assists taxpayers with IRS Offer in Compromise applications, financial disclosures, and negotiations related to federal tax debt.
We review your financial situation, evaluate potential eligibility, and communicate with the IRS on your behalf when representation is established.
Consultations are provided at no charge. Representation terms and fees are discussed in advance.
Attorney licensed in California with over 20 years of legal practice in civil litigation, tax law, bankruptcy, and corporate matters. Each case is evaluated on its facts and applicable law.
We provide personalized attention, clear communication, and ongoing case evaluation. Client experiences vary based on the circumstances and results depend on case-specific facts and applicable law.