Offer in compromise: the smallest offer the IRS can accept
Enter the balance, your county, the size of the household and its gross monthly income. The calculator runs Form 433-A (OIC) with the county standards and returns the reasonable collection potential, the floor every offer is measured against.
- Application fee
- $205
- Sent with a lump-sum offer
- 20 % of the offer
- Periodic offer paid over
- 6 to 24 months
- Accepted by law if no decision within
- 2 years
Minimum offer, lump sum (5 months)
$13,438
About $44,562 less than the $58,000 owed.
| Equity in assets (quick-sale value, after allowances) | $8,650 |
| Future income: $399 a month × 12 | $4,788 |
| Periodic offer (6 to 24 months): × 24 | $18,226 |
| Due with a lump-sum offer: fee and 20 % | $2,893 |
Form 433-A (OIC) Rev. 4-2026; allowable expenses $5,501 a month (Franklin County, Ohio). The IRS checks every figure; an offer below this amount is usually rejected. Not tax advice.
Compiled by Radif Partners · How we calculate · rules and rates read on irs.gov · not tax advice, the IRS decides
An offer in compromise settles a federal tax debt for less than the balance when the IRS agrees the full amount cannot be collected. The IRS does not bargain down from what you owe: it computes a reasonable collection potential on Form 433-A (OIC), which is the equity in your assets at 80 % of market value, minus loans and the allowances printed on the form, plus the income left each month after allowable living expenses, multiplied by 12 for a lump-sum offer or by 24 for a periodic offer. An offer at or above that figure can be considered; an offer below it is usually rejected unless special circumstances are documented. Each application carries a $205 fee and either 20 % of a lump-sum offer or the first periodic payment, both waived under the Low-Income Certification. For a couple in Franklin County, Ohio, owing $58,000 with $5,900 of monthly income, the formula gives $13,438 paid within 5 months or $18,226 over up to 24 months.
Three reasons the IRS will look at an offer
Form 656 asks you to tick one reason, and only one. Doubt as to collectibility is the common case: assets and future income together fall short of the debt, and the offer equals at least the minimum worked out on Form 433-A (OIC). Effective tax administration covers a person who could pay in full but for whom full payment would cause economic hardship (individuals only) or would be unfair for public policy or equity reasons. Doubt as to liability is a dispute about the tax itself and uses a separate form, Form 656-L; the booklet says not to file it at the same time as an offer based on ability to pay.
The IRS states the starting point plainly on its offer in compromise page: it generally will not accept an offer if the debt can be paid in full through a payment plan, equity in assets, or both. That is why an offer is a calculation before it is a negotiation. Under section 7122 of the tax code, the IRS has the authority to compromise; nothing obliges it to accept a particular amount.
Who may apply
Four conditions come before any figure. All required returns must be filed, at least one of the debts in the offer must already have been billed, the estimated tax payments for the current year must be made, and an employer must be current on federal tax deposits for the current quarter and the two before it. A person in an open bankruptcy cannot apply, and an open audit or innocent spouse claim has to be settled first. If returns are missing, the IRS keeps the initial payment, applies it to the debt and sends the rest back with no appeal.
The Franklin County example, step by step
The couple below rents, drives one financed car and has a small retirement account. Their figures are run through the same lines as the calculator at the top of the page.
| Step | Amount |
|---|---|
| Equity in bank, retirement, car and household goods, after the form's allowances | $8,650 |
| Gross monthly household income | $5,900 |
| Allowable monthly expenses, Franklin County standards | $5,501 |
| Remaining monthly income | $399 |
| Lump-sum minimum: equity + 12 months | $13,438 |
| Periodic minimum: equity + 24 months | $18,226 |
| Balance owed | $58,000 |
The lump-sum figure equals 23 % of what they owe. That ratio has no general meaning: a household with home equity or a larger paycheck can reach the full balance, in which case the IRS expects payment in full, usually through a plan. The reasonable collection potential page goes through every line of the form.
Minimum offer for your balance and income
Minimum offer, lump sum (5 months)
$13,438
| Equity in assets (quick-sale value, after allowances) | $8,650 |
| Future income: $399 a month × 12 | $4,788 |
| Periodic offer (6 to 24 months): × 24 | $18,226 |
| Due with a lump-sum offer: fee and 20 % | $2,893 |
What leaves your account with the application
The fee and the first payment go with the form, and the IRS keeps the payments even if the offer is later rejected or returned; they are applied to the debt. Under the lump-sum option you send 20 % of the offer and pay the rest in 5 or fewer payments within 5 months of acceptance. Under the periodic option you send the first monthly payment and keep paying every month while the offer is reviewed, and a missed payment can get the offer returned.
| Option | With the application | While under review | Total offer |
|---|---|---|---|
| Lump sum, paid within 5 months | $2,893 | nothing more | $13,438 |
| Periodic, 12 monthly payments | $1,724 | $1,519 a month | $18,226 |
| Periodic, 24 monthly payments | $964 | $759 a month | $18,226 |
The periodic offer costs more in total because the formula counts 24 months of remaining income instead of 12. A household that qualifies for the Low-Income Certification sends neither the fee nor any payment until the offer is accepted.
While the IRS reviews the file
Once the IRS confirms eligibility, it suspends most collection, extends the period it has to collect, may ask for more documents and may file a Notice of Federal Tax Lien. Payments on an existing installment agreement for the same debt can stop during the review, and the plan is reinstated if the offer fails and no new debt has appeared. Two points catch people out. The IRS can still levy up to the day an IRS official signs the offer as pending, and it keeps what a levy collected. Any refund for a return assessed before acceptance is offset against the debt and does not count as a payment on the offer. Penalties and interest keep accruing until all the offer terms are met.
If the IRS has not accepted or rejected the offer within 2 years of receiving it, the offer is accepted by law; time spent in an appeal does not count toward that window.
Accepted, rejected or returned
An accepted offer comes with conditions in Section 7 of Form 656. You must file and pay every tax on time for 5 years after acceptance, you cannot amend the returns covered, and a missed obligation lets the IRS default the offer and revive the original balance minus what was paid, with interest and penalties. The lien stays until the offer is paid in full, and the IRS publishes certain details of accepted offers in a public inspection file for one year.
A rejected offer can be appealed to the IRS Independent Office of Appeals within 30 days of the rejection letter; the fee is not refunded. A returned offer, for missing returns, missing payments or unanswered requests, has no appeal. The IRS Pre-Qualifier tool runs the same test without any contact details. This page reproduces the arithmetic of the forms; whether an offer is accepted is the IRS's decision alone, and nothing here is tax advice for your case.