Offer in Compromise

An offer in compromise is one of the programs offered by the Internal Revenue Service to allow someone to satisfy the tax liability owed by paying less than the full balance.

An offer in compromise is not made available to every taxpayer, as the Internal Revenue Service has strict guidelines it follows to determine who may make use of this benefit. These guidelines include the taxpayer's ability to pay, income, expenses, and assets in determining if payment of the full tax liability owed would create an undue financial hardship for the taxpayer.

To be considered for an offer in compromise, the taxpayer must submit the appropriate version of Form 433 along with the $150 non-refundable application fee and the initial payment under the offer. The Internal Revenue Service has up to two years to evaluate if they will accept an offer in compromise. During that period, the taxpayer must make payments according to the submitted offer in compromise as though it had been accepted. During the acceptance period, the Internal Revenue Service may still file a lien against the taxpayer's assets.