Tax relief/Offer in compromise
Settle your IRS debt for less, when the numbers support it.
An offer in compromise is the most powerful relief the IRS offers, and the most oversold. A California licensed CPA runs the same calculation the IRS will run, tells you plainly whether you qualify, and builds an offer designed to be accepted. Fixed fee, agreed before the work begins.
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What an offer in compromise really is
An offer in compromise is a formal agreement in which the IRS accepts less than the full balance and forgives the rest. It is written into the tax code, and the IRS accepts thousands of offers every year. It is also the program behind every advertisement promising to settle your debt for pennies on the dollar, and the reason so many people pay large fees for offers that were never going to work.
The IRS does not settle out of sympathy. It accepts an offer when the amount equals or exceeds what it calculates it could realistically collect from you before the collection period on your debt expires. That figure is called your reasonable collection potential, and it decides nearly every case.
Equity in your assets
The IRS values what you own at quick sale value, generally 80 percent of fair market value, less any loans against it. Bank balances, retirement accounts, vehicles, real estate and business assets all count, subject to certain allowances.
Your future income
The IRS projects your monthly disposable income, meaning what remains after allowable living expenses, and multiplies it by 12 if you will pay the offer as a lump sum, or by 24 if you will pay it over time.
The IRS expense standards
Allowable expenses are measured against the IRS Collection Financial Standards for food, housing, transportation and health care, not your actual budget. Knowing where those standards bind, and where documented exceptions apply, is often the difference between an accepted offer and a returned one.
Three grounds for an offer
Most offers rest on doubt as to collectibility: you cannot pay the full balance before the collection period ends. An offer can also rest on doubt as to liability, where the tax itself is wrong, or on effective tax administration, where full payment would cause exceptional hardship.
What to know before you apply
An offer is a formal application with real costs and consequences. These are the terms most people learn too late.
You must be current
Every required return must be filed, and if you work for yourself, estimated payments for the current year must be up to date. You cannot be in an open bankruptcy.
Money goes in with the application
The IRS charges an application fee, and a lump sum offer requires 20 percent of the offered amount up front. Those payments are generally kept if the offer is rejected, which is exactly why qualification should be tested before anything is filed. Taxpayers who meet the IRS low income guidelines are excused from both.
The IRS keeps your refunds
Any refund for the year the offer is accepted, and for earlier years, is applied to the debt and does not reduce the amount you offered.
Five years of compliance
After acceptance you must file and pay on time for five years. Breaking that promise can bring back the full original balance.
The collection clock pauses
The IRS has ten years to collect a tax debt, and that period is suspended while an offer is pending. A weak offer does more than fail. It gives the IRS more time to collect from you.
When an offer is the wrong answer. If your reasonable collection potential is higher than your balance, the offer will be returned no matter how it is presented. The better route is usually an installment agreement, a partial payment agreement that ends when the collection period does, or currently not collectible status. You will hear that from us before you spend a dollar on an application.
How Kim Accounting & Advisory handles it
One CPA works your case from the first call to the final resolution. Here is what that looks like for an offer in compromise.
- 1
Run the numbers
We pull your transcripts, confirm the collection expiration date for every year, and calculate your reasonable collection potential the way the IRS will, using its standards and its valuation rules.
- 2
Tell you plainly
If an offer makes sense, you see the likely offer amount and payment terms before committing. If it does not, you hear that too, along with the option that fits better.
- 3
Build, submit and defend
We prepare Form 656 and the complete financial statement with supporting documents, work directly with the offer examiner, and appeal a rejection when the numbers justify it.
Wondering whether you qualify?A short call and your transcripts will tell us. You will know before you pay an application fee.
Find out where you standCommon questions
Straight answers to what people ask us most about offers in compromise.
How much will the IRS accept?
There is no standard percentage. The IRS accepts the amount it calculates it could collect from your assets and future income, and not less. For some people that is a small fraction of the balance. For others it is the full amount, which means an offer is the wrong tool.
How long does an offer take?
Most offers take anywhere from several months to more than a year from submission to decision. If the IRS has not rejected an offer within 24 months of receiving it, the law treats the offer as accepted.
Will the IRS stop collecting while my offer is pending?
Generally, yes. The IRS may not levy your wages or accounts while an offer is under consideration. Refunds are still applied to the balance, and a federal tax lien can still be filed.
What about companies that advertise pennies on the dollar?
Be careful. The Federal Trade Commission and state attorneys general have taken action against firms that collected large fees for offers their clients never qualified for. Ask anyone you speak with to show you the reasonable collection potential calculation before you pay them.
What clients say
“I’d like to start by expressing my appreciation for Jason’s patience and thoroughness. My situation was quite complicated, but he guided me through every step of the process with clarity and care! What stood out most was his willingness to offer thoughtful advice, and if he didn’t have an immediate answer, he took the time to research and ensure he provided the best possible guidance. He consistently went above and beyond to assist me, and I highly recommend his services!”
Anibal Ruelas
Verified by Trustindex. Every review above is reproduced word for word.
Often part of the same problem
IRS problems rarely arrive one at a time. These are the issues that most often come up alongside an offer in compromise.
Find out if an offer is right for you
At Kim Accounting & Advisory, every offer starts with the math. Jason Kim calculates your reasonable collection potential himself, tells you plainly whether an offer will work, and prepares and negotiates it personally, for a fixed fee agreed before the work begins.
- See the calculation the IRS will run on your finances
- Learn whether an offer or another option fits better
- Know the full cost before you commit to anything
Free consultation
One conversation with a licensed CPA. No obligation and no pressure. If we are not the right fit, you will still leave with a clear next step.
Find out where you standServing clients nationwide, fully virtual.