If you’re drowning in IRS tax debt and can’t possibly pay the full amount, you may have heard of the Offer in Compromise (OIC) program—an option that allows you to settle your tax debt for less than you owe.
But not everyone qualifies.
At Back Tax Rescue, we help clients throughout Fulton and Gwinnett County navigate the Offer in Compromise process, from eligibility to submission. In this guide, you’ll learn exactly how the IRS decides whether you qualify, and what you can do to improve your chances of approval.
💼 What Is an Offer in Compromise?
An Offer in Compromise is a formal agreement between you and the IRS that allows you to pay a reduced amount of your total tax debt—if the IRS believes you’ll never be able to pay the full balance.
The IRS only accepts OICs when:
- You have no ability to pay the full debt, even over time
- You’re compliant with all current tax filings
- Your financial information supports your request
📌 In 2022, the IRS accepted about 30% of all OIC applications. So preparation is critical.
🧠 How the IRS Evaluates OIC Eligibility
The IRS uses a formula called Reasonable Collection Potential (RCP) to determine whether to accept your offer.
Here’s how it works:
✅ 1. Monthly Disposable Income
The IRS calculates your monthly income minus allowable living expenses (based on national and local standards).
Example:
Income: $3,200/month
IRS-Allowable Expenses: $2,700/month
Disposable Income: $500/month
That $500 is what they assume you can afford to pay monthly—unless you prove otherwise.
✅ 2. Asset Equity
They add up your assets, including:
- Bank accounts
- Vehicles
- Home equity
- Retirement accounts
- Investment properties
- Business assets
The IRS applies quick-sale discounts to many assets, but they still include the value in your total RCP.
📊 Offer in Compromise Calculation Formula
Lump Sum Offer:
(Monthly Disposable Income x 12) + Net Realizable Asset Equity = Minimum Offer Amount
Periodic Payment Offer:
(Monthly Disposable Income x 24) + Net Realizable Asset Equity = Minimum Offer Amount
The lower your disposable income and asset equity, the more likely your OIC will be accepted at a reduced amount.
🛑 Common Reasons OICs Are Denied
- You didn’t file all required returns
- You didn’t include full financial details
- You offered too little
- You’re not in compliance with estimated payments or current taxes
- You have sufficient income or assets to pay over time
✅ What Improves Your Chances of Approval
- You owe more than you could ever repay
- You’re on fixed income (Social Security, disability, etc.)
- You have few assets or little equity
- You’re dealing with medical hardship or long-term unemployment
- You’re current on all filings and payments
The IRS would rather get something than nothing—and they’ll consider a settlement if your numbers prove their only other option is no collection at all.
👨💼 How Back Tax Rescue Builds a Strong OIC Application
We’ve helped clients across Atlanta, Roswell, Snellville, and beyond cut their IRS debt through properly prepared Offers in Compromise.
We help you:
- ✅ Calculate your Reasonable Collection Potential accurately
- ✅ Choose between lump sum or periodic payment structure
- ✅ Complete and file Form 656 and Form 433-A (OIC)
- ✅ Gather and submit all required supporting documents
- ✅ Communicate directly with the IRS on your behalf
- ✅ Appeal if your offer is initially rejected
🏠 Real Example (Fictionalized)
Tasha in Norcross owed over $84,000 in tax debt after years of self-employment. She was on a fixed income with no savings and no home equity.
We prepared a complete OIC showing her monthly disposable income was under $50, and her total assets were less than $2,000. Her offer of $1,200 was accepted—settling over $80K of debt permanently.
📞 Ready to Find Out If You Qualify for an OIC?
Don’t guess. Let us calculate your RCP, build your application, and work to get your IRS debt settled for less—if you qualify.
📞 Call Back Tax Rescue: 470-699-1187
📧 Email: info@backtaxrescue.com
🗓️ Schedule a Free OIC Evaluation Today »
Let’s settle your tax debt—and give you a clean slate to start over.
