An Offer in Compromise is a settlement with the IRS for less than you owe. It is not a discount program, and most offers get rejected — usually for reasons that were visible before filing.
The short version is that the IRS accepts an offer when it decides that collecting the full balance is either impossible (doubt as to collectibility) or inequitable (effective tax administration). Every other OIC is either a doubt-as-to-liability case — which is really an audit dispute in a different wrapper — or an offer that should not have been filed. An attorney’s job in an OIC is not filling out the forms. It is running the analysis honestly before you commit a 20% deposit and six to twelve months to the process.
The whole case hinges on one number: Reasonable Collection Potential
Reasonable Collection Potential (RCP): the quick-sale value of your assets plus your future disposable income over 12 or 24 months, as the IRS calculates it — not as your bank statement shows it.
The IRS computes RCP from Form 433-A (OIC) or Form 433-B (OIC). If your offer is below your RCP, the IRS rejects it and keeps the deposit. If your offer is at or above RCP, the IRS is required to accept it under its own procedures. That symmetry is why the analysis matters more than the paperwork: an OIC is won or lost in the RCP math.
Two things trip up most taxpayers. First, asset valuation — retirement accounts, business equity, and receivables are not valued the way you would value them, and the IRS’s numbers usually come in higher than yours. Second, the future-income calculation does not use your actual spending. It uses the IRS Collection Financial Standards, which cap how much of your housing, transportation, and living expenses count against your income. A family that feels broke on paper can show significant “disposable” income under the Standards.
Do you qualify for an Offer in Compromise?
The honest screen takes three inputs: total assessed balance, quick-sale asset value, and Standards-adjusted monthly income. From there:
If assets plus 12–24 months of adjusted income are worth less than your balance, you have a viable doubt-as-to-collectibility offer. If they are worth more, an OIC will fail, and the better tools are an installment agreement, a partial-pay installment agreement, or Currently Not Collectible status. And sometimes the right answer is timing: the ten-year Collection Statute Expiration Date (CSED) may be close enough that waiting beats settling — a rejected OIC does not reset the statute, but the six to twelve months it spends pending are added to the clock.
You must also be current: all required returns filed and current-year estimated payments made. The IRS returns offers from non-compliant taxpayers without reviewing them.
What an OIC costs and how long it takes
The filing package is Form 656 plus the 433 series, a $205 application fee, and a 20% non-refundable deposit on a lump-sum offer (low-income taxpayers are exempt from the fee and deposit). Expect six to twelve months to a decision. If the offer is rejected, you have 30 days to appeal to the IRS Independent Office of Appeals — and appeals reverse a meaningful share of rejections where the RCP math was done right the first time.
What we do differently
We run the RCP analysis before we recommend filing anything — and we tell you plainly when an OIC is the wrong tool, because filing a loser costs you the deposit, the fee, and a year of suspended collection statute. Since 2013, Brotman Law has handled more than 2,500 tax matters across collections, audits, and litigation, and the collection alternatives we recommend get chosen by the numbers, not by what is easiest to sell. If the analysis says installment agreement, that is what we will tell you.
How engagements work
Many matters like this one run as a monthly flat-fee engagement: one number, agreed up front, that covers the work — agency contact, deadlines, document responses, strategy — until the matter resolves. Shorter, well-defined projects are often a one-time flat fee instead, and some matters genuinely fit hourly billing better. We will tell you which you are looking at on the first call, before you commit to anything. If you want the details first, see how we price our work.
Want the RCP analysis before you file?
Tell us the balance and your situation. We respond to new inquiries within one business day.
If you want the analysis first, book a free 15-minute call and have a rough balance figure ready. If your offer was already rejected, bring the rejection letter — the 30-day appeal window starts from its date. Related reading: what an OIC is, what to do after a rejection, and the full collections practice.
By Sam Brotman, JD, LLM, MBA — managing attorney, Brotman Law. CA Bar No. 274966. Last updated August 29, 2026.
