OFFER IN COMPROMISE SERVICES | S.H. BLOCK TAX SERVICES

Stressed About Your Tax Liability? An Offer in Compromise May Be the Answer You’re Looking For

As tax resolution professionals, we see it nearly every day: the weight of unpaid taxes that fills your thoughts, drains your energy, and complicates nearly every aspect of life.

But the IRS and state authorities don’t want you to stay buried forever. They offer programs to help taxpayers break free from debt, including an “offer in compromise” that may relieve your debt without having to pay off its full cost.

Let’s walk through how an offer in compromise typically works, whether it might be a fit for you, and how S.H. Block Tax Services can help you put together your best offer for the IRS. And if you would like to speak to a tax resolution professional now, don’t hesitate to call us at (410) 872-8376 or fill out our online contact form.

What Is an Offer in Compromise (OIC)?

Put simply, an OIC is a settlement option offered by the IRS (and in some states) that allows you to resolve your tax debt by paying less than the full amount owed. Rather than forcing you to pay the total liability, the government may accept a lower lump sum or payment plan.

But offers in compromise are not automatically accepted. You must prove your financial reality demands it. Working with a seasoned tax resolution team can help you build a persuasive case.

Who Qualifies for an Offer in Compromise?

Meeting eligibility is not a guarantee, but here are some of the basic qualifiers:

• You must be current on all required tax returns (federal and/or state).
• You must not be in ongoing bankruptcy or an open tax appeal for those years.
• For individuals, your estimated taxes must be up to date.
• For businesses, any required tax deposits must be current.
• You must show that your income, assets, and future earning potential leave you unable to fully satisfy the debt in a reasonable period.

Even if a pre‑qualifier tool suggests you’re eligible, the IRS (or state) may still decline your offer. An eligibility check is just the first gate in the process.

How Does the IRS Decide to Accept an Offer in Compromise?

There are three major “grounds” the IRS considers when evaluating whether to accept your offer:

1. Doubt as to Collectability. You lack sufficient assets or income to realistically pay your full tax liability, even over time.
2. Doubt as to Liability. You can show the IRS may have erred in calculating your tax debt and there’s a legitimate basis to dispute the amount owed.
3. Effective Tax Administration. Paying the full amount wouldn’t be fair because doing so would cause financial hardship, violate public policy, or otherwise be inequitable in your particular circumstances.

Your job is to frame your case in one or more of these categories, backing it with clear, honest documentation. That’s where we can help.

How Do You File an Offer in Compromise?

Filing can be complex, but here’s a simplified breakdown of what you usually need:

• Form 656 (Offer in Compromise): You’ll specify which tax years or types are included, your proposed offer amount, and the preferred payment terms (either a lump sum or periodic payments).
• Form 433-A (for individuals) or 433-B (for businesses): This is your financial disclosure including all your assets, debts, income, and necessary living expenses.
• Supporting documentation: You may also need to submit paystubs, bank statements, proof of medical expenses, etc., to validate the numbers you put on those forms.

You also will need to calculate your Reasonable Collection Potential. This is what the government believes it could realistically collect from you. You then propose an offer at or above that threshold. Undervaluing yourself can lead to rejection. Overreaching can kill your chance altogether.

What Happens After You Submit an Offer in Compromise?

Once you have submitted your offer:

• The IRS (or state agency) reviews your forms and supporting documents.
• They often ask for more time to review your offer.
• They may request more information or clarification.
• You must keep up with any required payments (if you proposed a periodic payment).

Please note that the decision may take months or sometimes years, and you may be given a counteroffer before a final decision.

If accepted, you must follow through on the terms.

Your offer might also be quickly rejected, or you may be contacted with an opportunity to bring yourself into eligibility. You may appeal rejections or reapply under new circumstances. It’s not uncommon for negotiations to continue back and forth until an acceptable agreement is reached.

How Does an Offer in Compromise Affect License Holds?

If your license is being withheld (or your passport), will submitting an OIC help free it?

Possibly, but not automatically. In Maryland, for example, submitting an OIC does not guarantee that a driver’s license hold or professional license renewal block is released immediately. The hold is usually lifted once the plan is set up or full payment is made.

So, even when your OIC application is pending, license holds, liens, or collection actions may continue. The key is getting your offer accepted and into effect.

Why Working with S.H. Block Can Make the Difference

• Settling tax debt through an OIC is one of the most complicated tax relief paths available. Here’s how we can bring you extra value:
• Strategic advice. We help you choose the strongest approach, whether that’s an OIC or an alternative like an installment agreement or Currently Not Collectible status. Keep in mind there are payment options ranging from $0 to full pay, and an OIC isn’t always the most beneficial choice. We can also discuss how alternatives like CNC, Partial Payment Installment Agreement (PPIA), and Collection Statute Expiration Date (CSED) can affect timelines.
• Accurate calculations. We dig into your financials to ensure nothing is missed and your offer is credible.
• Professional presentation. We frame your documents and narrative to highlight factual support, fairness, and need.
• Ongoing support. Once submitted, we monitor communications, respond to IRS questions, and negotiate on your behalf.
• Focus on outcomes. Our goal is not just submitting an offer, but getting it accepted and lifting any license holds in the process.

Other Common Questions About OICs

Q: Do I have to pay a fee or deposit to apply?

Yes, there is usually a nonrefundable application fee. If you choose a periodic payment plan, there’s often an initial payment requirement. Low-income taxpayers may qualify for waivers under certain conditions.

Q: What if my offer is rejected?

You have options. You can appeal within a set timeframe, revise and resubmit, or explore alternative relief like payment plans or hardship status.

Q: Does an OIC stop liens, garnishments, or levies immediately?

Not always. But once your offer is accepted, it halts many collection tools. Before that, agencies may still act. The OIC doesn’t always relieve existing tax liens until the terms are satisfied.

Q: How long will the process take?

The timeline varies. It can take months or years depending on the complexity of your financial situation and how responsive you and the agency are.

Get Help from Tax Resolution Experts

Collection notices, license holds, and financial pressure can feel overwhelming. But there are paths out.

An offer in compromise offers hope for taxpayers who truly can’t pay in full. And with S.H. Block Tax Services by your side, you don’t have to face it alone.

Let us help you reconcile tax debt, restore your licenses, and reclaim your life. Reach out today for a free consultation: call (410) 872‑8376 or fill out our contact form. We can help you find the solution to your tax problems.

IRS CIRCULAR 230 DISCLOSURE: To comply with Department of the Treasury  requirements, any U.S. tax advice contained here is not intended or written to be used, and cannot be used by any taxpayer, for avoiding penalties that may be imposed on the taxpayer and supporting the promotion or marketing of any matters addressed herein.