An Offer in Compromise is a formal agreement between a taxpayer and the IRS that settles tax liabilities for less than the full amount owed. Authorized under Internal Revenue Code § 7122 and governed by Treasury Regulation § 301.7122-1, the OIC program recognizes that collecting the full tax liability from some taxpayers would be unfair, create economic hardship, or simply be uncollectible.
The IRS accepts Offers in Compromise on three grounds:
The IRS uses a specific formula to calculate the minimum acceptable offer amount, known as the Reasonable Collection Potential (RCP). Understanding and accurately calculating your RCP is the foundation of a successful OIC application.
The IRS determines your Reasonable Collection Potential (RCP) using this formula:
RCP = Net Realizable Equity in Assets + (Monthly Disposable Income × Future Income Multiplier)
Here’s what each component means:
For example, if your net asset equity is $5,000 and your monthly disposable income is $200, a lump sum offer would be calculated as: $5,000 + ($200 × 12) = $7,400 — regardless of whether you owe $50,000 or $500,000.
You may be a candidate for an Offer in Compromise if:
The IRS offers a free OIC Pre-Qualifier Tool on its website, but this tool provides only a rough estimate. A professional analysis by Global Gate Tax Relief gives you a far more accurate assessment of your eligibility and likely offer amount.
Call Global Gate Tax Relief at 1-877-800-8180 for a free, no-obligation consultation. We review your tax situation, pull your IRS transcripts, and conduct a preliminary RCP calculation to determine whether an OIC is a viable strategy for your case.
We conduct a comprehensive review of your financial situation, including income, expenses, assets, and liabilities. We use the IRS Collection Financial Standards (also known as Allowable Living Expenses) to determine your disposable income, and we accurately value all assets using IRS-accepted methodologies. Every number must be defensible — the IRS will scrutinize your financials closely.
We prepare and submit your complete OIC package, which includes:
Once submitted, the IRS assigns your case to an Offer Examiner who reviews all documentation and verifies your financial information. This process typically takes 7-12 months. During this period, IRS collection activity is suspended under IRC § 6331(k) — meaning no levies or garnishments while your offer is pending.
If the Offer Examiner questions any aspect of your application, our team responds directly, providing additional documentation or legal arguments to support your case. We negotiate on your behalf at every stage.
If your OIC is accepted, you must:
Failure to comply with these terms can result in the IRS revoking the agreement and reinstating the full original liability.
Settle your tax liability for a fraction of the total balance owed, often saving tens or hundreds of thousands of dollars
Once accepted and completed, the compromised tax years are fully resolved with no lingering liability
All IRS collection actions stop while your offer is pending, including wage garnishments and bank levies
The IRS releases any federal tax liens within 30 days of full payment of the accepted offer
Choose between a lump sum payment (within 5 months) or periodic payments (up to 24 months)
An OIC stops the IRS collection process before it reaches the most severe enforcement actions, like property seizures
Experienced professionals factor the remaining CSED time into offer strategy, potentially reducing the offer amount further
Maria, a self-employed graphic designer in Phoenix, owed $182,000 in federal income taxes from three years of underreported freelance income. After a divorce left her as the sole provider for two children, she was living on approximately $4,800/month. Her assets included a modest home with $15,000 in equity and a vehicle worth $6,500 with a $4,000 loan.
Global Gate Tax Relief calculated her RCP: – Net asset equity: $15,000 (home) + $2,500 (vehicle equity) = $17,500 – Monthly disposable income after IRS-allowable expenses: -$150 (negative — her allowable expenses exceeded her income) – Future income multiplier: 12 × $0 = $0 – Total RCP: $17,500
We submitted a lump sum OIC at $17,500. After seven months of processing, the IRS Offer Examiner requested additional verification of Maria’s childcare expenses. We provided documentation, and the offer was accepted. Maria borrowed $17,500 from a family member and settled $182,000 in tax liability — saving over $164,000.
Our professionals are authorized to represent you before the IRS and have deep expertise in OIC preparation and negotiation.
We use IRS-accepted methodologies and Collection Financial Standards to ensure your offer amount is calculated correctly — not too high (costing you money) or too low (risking rejection).
We prepare every form and supporting document to IRS specifications, minimizing delays and requests for additional information.
We don’t submit and hope. We engage with the Offer Examiner throughout the review process to advocate for your case
Call 1-877-800-8180 to find out if you qualify before committing to anything
If your offer is initially rejected, we evaluate whether an appeal to the IRS Independent Office of Appeals is warranted and represent you through the appeals process
IRS acceptance rates for Offers in Compromise have historically ranged from 30% to 40% of processed applications. However, the acceptance rate among professionally prepared applications is significantly higher, because professionals screen for eligibility before submitting and prepare more accurate, complete packages.
From submission to final decision, the OIC process typically takes 7-12 months. Complex cases or those requiring additional documentation may take longer. During this time, IRS collection activity is suspended under IRC § 6331(k).
If your offer is rejected, you have 30 days to request an appeal with the IRS Independent Office of Appeals. We evaluate the reason for rejection and advise whether an appeal is likely to succeed. If an OIC is not feasible, we explore alternative resolution strategies such as an installment agreement or Currently Not Collectible status.
Yes. You must submit a $205 application fee (waived for qualifying low-income taxpayers) and an initial payment — either 20% of the offer for a lump sum offer or the first monthly installment for a periodic payment offer.
No. Under IRC § 6331(k), the IRS is generally prohibited from levying your wages, bank accounts, or other property while an OIC is pending, during the 30-day period after rejection, and during any appeal.
The OIC itself does not appear on credit reports. However, if the IRS filed a federal tax lien before your OIC was submitted, that lien remains a public record that lenders can find (tax liens no longer appear on credit reports). Once the OIC is fully paid, the lien is released, and you can request a lien withdrawal using Form 12277.
No. You must be in filing compliance — meaning all required tax returns must be filed — before the IRS will consider an OIC. We help you prepare and file all delinquent returns as part of the OIC preparation process.
If you owe the IRS more than you can realistically pay, an Offer in Compromise may be your best path to a fresh start. But the process demands accuracy, completeness, and strategic thinking — and the stakes of getting it wrong are too high to risk.
