The IRS Offer in Compromise(OIC)Timeline

After you submit your offer in compromise application and documentation, you should expect to hear from the IRS within six to 24 months for a final resolution. While a straightforward case may be resolved within six to 12 months, more complex cases may take longer. 

 

The timeline varies quite a bit due to the IRS’s workload, the complexity of each individual case, whether an application was completed accurately, and how promptly a taxpayer responds to requests for more information. Understanding the full OIC process before applying is crucial, and working with an experienced tax resolution company can increase your approval rate and help you avoid delays. 

 

At Tax Network USA, we help prepare offer in compromise applications, communicate with the IRS on your behalf, and assist with appeals. Learn more about our OIC application support.

Key Takeaways:

• OIC timeline – It can take up to 24 months for the IRS to evaluate an offer, depending on its complexity.
• Preparation – This is a critical part of the OIC application and may take 2 to 4 weeks to complete.
• OIC delays – IRS requests for updated bank statements or other financial records may delay your request.
• OIC application fee and payments – nonrefundable; they’re applied to your tax debt if your offer is rejected.
• IRS collection statute – It’s suspended during OIC request evaluation and for an additional 30 days if the offer is rejected.

What Happens Before You Submit: Preparation Time

Your offer in compromise timeline actually starts before the IRS receives anything. Taking your time to complete the application correctly, double-checking your numbers, and including all requested documentation can help you avoid requests for documentation that further delay resolution. Here’s everything you need to fill in for your application and how much it will cost:

• Form 656 – Offer in Compromise booklet 
• Form 433-A – (OIC) or 433-B (OIC) (businesses) and all required documentation as specified on the forms.
• Application fee – $205
• Initial payment – lump sum (20% of your offer) or first initial payment for a periodic payment (you’ve got to keep making the remaining balance in monthly installments while the IRS considers your offer).

Each form also has a list of the documents you need to submit with your application for the IRS to review. The application process covers your income, living expenses, bank balances, investment accounts, vehicles, real estate, and other financial information. The IRS uses this information to calculate your reasonable collection potential (RCP), or what it can reasonably expect to collect from you.

 

This step can take several weeks, but it’s critical because the IRS can return an OIC application for inaccuracies or missing documents. Being thorough saves you the time you’ll otherwise take to send the documents the IRS will request later, and it also improves your chances of approval.

The IRS Initial Review: Two to Three Months

After the IRS receives your application and supporting documents, they do an initial review to determine whether it can process your offer. This means verifying that:

• All required forms are included and signed.
• All required tax returns are filed.
• Required estimated tax payments or federal tax deposits are current
• Applicant is not in bankruptcy proceedings.
• Fees and initial payment are made (or the applicant qualifies for Low-Income Certification)

The IRS returns the application if it cannot process it. You do have the chance to correct and resubmit it, but the time spent waiting is lost. The lost time matters because the CSED clock is paused during the process, and penalties and interest continue to accrue.

The Full IRS Review: Six to Twelve Months

After the IRS verifies that it can process the offer, they begin the full review. The IRS examiner assigned to your file compares it with your IRS records and supporting documents. They verify your income, review bank account balances and transactions, verify asset values, compare claimed expenses with allowed expenses, and calculate your reasonable collection potential.

If there are substantial differences, the examiner reconciles those differences, which means that your reasonable collection potential changes. This happens mostly when taxpayers rely solely on the OIC pre-qualifier tool to determine their numbers. The tool is useful to give you an idea of whether you may qualify, but it also has some limitations – if this is what you used, consider consulting a tax professional for a final verification before submitting your offer.

 

During this time, you need to continue making monthly payments if you proposed a periodic payment offer. However, the IRS pauses tax collection activities, such as bank levies and wage garnishments.

What the IRS is Actually Doing During the Review

It can be frustrating to go months without updates or progress on your application. IRS agents tend to conduct substantial verification of offer-in-compromise applications, which means a longer wait. Rather than solely relying on the information included in your disclosures, they may compare it to account records, public asset information, and third-party sources.

 

Throughout this, the IRS is trying to determine whether it’s better for them to accept your offer or continue pursuing collection efforts. If your offer is lower than what they believe they can collect from you before CSED, they may propose a higher offer or reject your offer.

 

Focusing on accurate financial analysis and reporting from the beginning can prevent you from building an application around an offer amount that doesn’t actually match your financial situation. At TNUSA, we do a deep dive into your assets, finances, and expenses the same way the IRS will review your application. This ensures we propose an offer that’s fair to you and one the IRS is likely to approve.

What Happens if the IRS Requests More Information

Information document requests are common; they don’t necessarily indicate that a rejection is coming – sometimes it takes too long for an officer to open your file, and when they do, some of the financial information you provided might be outdated. If you receive an IRS letter requesting more information, you typically have 14-30 days to respond.

 

Should you fail to respond, the IRS may move forward with the information they have, which often leads to a rejection. Ensure your response includes everything the IRS requests; incomplete answers may lead to additional requests, further delaying your OIC response.

What Happens if the IRS Rejects the Offer

OIC rejections are fairly common. According to the IRS Data, the IRS rejected 86% of OICs for the financial year 2025. You generally have 30 days from the date of the rejection letter to request a review by the IRS Independent Office of Appeals by submitting Form 13711. This can extend the original timeline by four to 12 months. Missing this deadline means losing your right to appeal.

 

If the rejection stands, the IRS keeps the initial payment and any periodic payments made. That money is applied to your tax balance.

The Real Financial Risks of an OIC Application

When an OIC application is successful, it can provide significant financial relief. But it does also come with risks. The application fee is $205 unless you qualify for Low-Income Certification. Then there’s the 20% lump-sum initial payment, or the first periodic payment, which also increases financial risk, particularly since you do not get any of these fees or payments back if your offer is rejected. However, you just don’t lose the amount; it’s applied to your tax debt.

 

During this time, interest and penalties continue to increase, ultimately leading to a higher tax bill if your offer is not accepted. Additionally, the Collection Statute Expiration Date is suspended when your OIC is under review, plus an extra 30 days if it gets rejected, to allow for an appeal. This may give the IRS additional time to collect, which could affect your tax strategy if the debt was nearing expiration.

What if the OIC is Accepted?

If the IRS accepts your offer, you must make all payments as required under your agreement. For a lump-sum offer, the balance must be paid in five or fewer payments. If the IRS accepts your periodic payment schedule, payments continue for 24 months.

 

For doubt as to collectibility and effective tax administration, OICs’ requirements include staying current on all tax filings and payments for five years after acceptance of your offer.

 

If you don’t fulfill the terms of your agreement, the IRS can determine that the OIC is in default and terminate it, which makes all your tax debt due immediately. The IRS can collect the amount originally owed (less the amount paid), including penalties and interest. This means they can also resume collection activities such as levies and wage garnishment.

Does an OIC Affect Your Credit?

An offer in compromise does not directly affect your credit, as it’s not reported to the credit bureaus. However, if your offer is accepted, it appears on public inspection files for a year – the file will contain limited information such as your name, city, state, and offer terms. This may indirectly affect you, as some lenders, business partners, or employers may consider a pre-existing tax debt a sign to be more cautious when working with you.

 

If the IRS filed a lien, that is still publicly accessible. Again, this doesn’t directly affect your credit, but it may affect lending decisions.

Other Options if an OIC is Not Right for You

An offer in compromise isn’t the only option for back tax resolution. Other potential solutions include:

• Installment agreement: Allows you to pay your tax debt in manageable monthly payments.
• Currently not collectible status: Pauses IRS collections temporarily until you’re able to pay your tax debt without financial hardship.
• Penalty abatement: Reduces or eliminates the penalty fee and the interest that the penalties have accrued.

The best option for you depends on how much you owe, how close the Collection Statute Expiration Date is, your financial situation, compliance history, and the likelihood of changes in your financial situation.

 

A lot goes into it, so we recommend talking to a tax professional before any application to be sure it’s the best way forward. For example, while an installment agreement is a great option, it’s not the right choice if you’re so close to CSED and in CNC status. If you’re unsure of the way forward, we can help, and the first consultation is on us (no strings attached). Don’t commit to unnecessary tax liabilities.

Frequently Asked Questions (FAQs)

Here are common questions we receive on the OIC application:

Do IRS collection efforts stop during an offer in compromise review?

The IRS generally pauses collection activities, such as wage garnishment and bank levies, during the OIC review and for 30 days after rejection. Other collection efforts, such as new or pre-existing liens, may continue.

What happens to the upfront payment if the OIC is rejected?

The 20% payment for your lump-sum offer or the monthly payments for your periodic offer are generally applied to your tax debt.

Can the offer in compromise timeline be expedited?

There’s no routine way to expedite the offer in compromise process. Generally, the easiest way to expedite the process is to send all required documentation the first time, so the IRS does not have to request further information from you.

What is the offer in compromise acceptance rate?

The acceptance rate varies from year to year. In fiscal year 2025, there were 38,797 proposed offers in compromise. The IRS accepted 5,464 offers, which is 14% of the total. Note, though, that the processed offers may include those that were submitted before 2025. Historically, this program has had fairly low acceptance rates.

Is an offer in compromise automatically accepted after two years?

Per federal law, an offer is deemed accepted if the IRS doesn’t reject it within 24 months of submission. There are exceptions, though, and the two-year period does not include the appeal period.

Can I submit another OIC after a rejection?

Yes, you can submit another offer, but you must pay the application fee and down payment again. However, you should also look for issues in their initial proposal, as submitting the same information and application again is likely to result in another rejection.

Get a Realistic Assessment of Your OIC Offer Before You Commit

Applying for an offer in compromise involves significant preparation time, a substantial down payment, and a long waiting period. Before you commit to this option, reach out to Tax Network USA. 

 

We work to prepare accurate OIC submissions, manage IRS correspondence and information requests, and assist with appeals if necessary.  Schedule a confidential consultation to discuss whether an offer in compromise is the best option for you before you commit to the process and the wait – and let us speed up the process by leveraging our experience to your case.