IRS Offer in Compromise: Fee, Eligibility and How It Works
The IRS offer in compromise application fee is $205, plus an initial payment, unless the individual meets the IRS’s low-income qualifications. The IRS Offer in compromise page (page last reviewed 19-Oct-2026) and the Form 656 Booklet (Rev. 4-2026) give the same fee. An offer can be paid as a lump sum, with 20% of the offer amount paid when applying, or in periodic payments.
Maintained by Archie Chang · IRS texts checked on November 2, 2026 · Methodology & sources
Fee and payments
The IRS lists a $205 application fee and a first payment unless the low-income qualifications are met. A lump sum offer pays 20% of the offer amount with the application, and a periodic payment offer makes the first payment with the offer and pays the rest monthly within 6 to 24 months.
| Item | What the booklet says |
|---|---|
| Application Fee | Offers require a $205 application fee. |
| Lump Sum | This option requires 20% of the total offer amount to be paid with the offer and the remaining balance paid in 5 or fewer payments within 5 or fewer months of the date your offer is accepted. |
| Periodic Payment | This option requires you to make the first payment with the offer and the remaining balance paid in monthly payments within 6 to 24 months, in accordance with your proposed offer terms. |
| Low-Income Certification | there is no requirement to submit any offer payments or the application fee upon submission or during the consideration of your offer |
| Low-Income Certification, after acceptance | your first payment will be due 30 calendar days after acceptance of the offer, unless another date is agreed to in an amended offer |
Arithmetic on the 20% rule, not an IRS example: for a $10,000 offer paid as a lump sum, 20% is $2,000, so $2,000 plus the $205 fee is $2,205 due with the application, and $8,000 remains.
IRS wording
“Every OIC application requires a $205 application fee and a first payment unless you meet the low-income qualifications.”
“Offers require a $205 application fee.”
“Exception: If you are an individual and meet the Low-Income Certification guidelines, there is no requirement to submit any offer payments or the application fee upon submission or during the consideration of your offer.”
“Pay 20% of your offer amount when you apply. If accepted, pay the remaining balance in five or fewer payments.”
“Lump Sum: This option requires 20% of the total offer amount to be paid with the offer and the remaining balance paid in 5 or fewer payments within 5 or fewer months of the date your offer is accepted.”
“Make the initial payment when you apply and continue making periodic payments while we consider your offer. If accepted, continue making payments until the offer amount is paid in full.”
“Periodic Payment: This option requires you to make the first payment with the offer and the remaining balance paid in monthly payments within 6 to 24 months, in accordance with your proposed offer terms.”
“Note: Under the periodic payment option, you must continue to make monthly payments while the IRS is evaluating your offer. If you fail to make these payments at any time prior to receiving a final decision letter, the IRS may return your offer. You cannot appeal this decision.”
What the IRS says an offer in compromise is
The IRS says an offer may allow a tax debt to be settled for less than the full amount owed if the taxpayer can’t pay in full or doing so would cause financial hardship, and that it considers income, expenses and asset equity.
IRS wording
“An offer in compromise (OIC) may allow you to settle your tax debt for less than the full amount you owe if you can’t pay in full or doing so would cause financial hardship. We consider your income, expenses, and asset equity.”
“Generally, we won’t accept an offer if you can pay your tax debt in full through a payment plan and/or equity in assets. Before applying, explore other payment options to determine which option is right for you.”
“Generally, the IRS will not accept an offer if you can pay your tax debt in full through an installment agreement and/or equity in assets. If paying the liability in full would create an economic hardship or if you have an exceptional circumstance where full payment may be considered unjust, you may be eligible for an offer under the effective tax administration guidelines.”
Low-income certification
Form 656 says an individual or sole proprietor qualifies if adjusted gross income, or household gross monthly income times 12, is equal to or less than the chart amount for the family size and location. A business other than a sole proprietor, or an offer filed for a deceased individual, is outside Low-Income Certification on the form.
“IF YOU QUALIFY FOR THE LOW-INCOME CERTIFICATION DO NOT INCLUDE ANY PAYMENTS WITH YOUR OFFER. Generally these payments will not be returned and will be applied to the tax liability in the best interest of the government.”
| Size of family unit | 48 contiguous states, D.C., and U.S. Territories | Alaska | Hawaii |
|---|---|---|---|
| 1 | $39,900.00 | $49,875.00 | $45,900.00 |
| 2 | $54,100.00 | $67,625.00 | $62,225.00 |
| 3 | $68,300.00 | $85,375.00 | $78,550.00 |
| 4 | $82,500.00 | $103,125.00 | $94,875.00 |
| 5 | $96,700.00 | $120,875.00 | $111,200.00 |
| 6 | $110,900.00 | $138,625.00 | $127,525.00 |
| 7 | $125,100.00 | $156,375.00 | $143,850.00 |
| 8 | $139,300.00 | $174,125.00 | $160,175.00 |
| For each additional person, add | $14,200.00 | $17,750.00 | $16,325.00 |
IRS wording
“You qualify if your adjusted gross income, as determined by your most recently filed Individual Income Tax return (Form 1040) or your household’s gross monthly income from Form 433-A(OIC) x 12, is equal to or less than the amount shown in the chart below based on your family size and where you live. If you qualify, you are not required to submit any payments or the application fee upon submission or during the consideration of your offer. If your business is other than a sole proprietor or the offer is being filed for a deceased individual, you do not qualify for Low-Income Certification. The IRS will verify whether you qualify for Low-Income Certification.”
“Only individuals qualify for consideration of the low-income qualification.”
“If you meet the low-income qualifications, you don’t have to pay the application fee, initial payment, or periodic payments while we review your offer.”
“You are considered an individual if you are seeking compromise of a liability for which you are personally responsible, including any liability you incurred as a sole proprietor.”
“If you qualified under the Low-Income Certification and are not required to submit payments while the offer is under consideration, your first payment will be due 30 calendar days after acceptance of the offer, unless another date is agreed to in an amended offer.”
Eligibility
The IRS Offer in compromise page lists four conditions: all required returns filed, required estimated tax payments made, no open bankruptcy and, for employers, required federal tax deposits made for the current and last two quarters. The Form 656 Booklet adds a bill for at least one tax debt included on the offer.
IRS wording
To be eligible, you must:
- File all required tax returns
- Make required estimated tax payments
- Not be in an open bankruptcy
- If you’re an employer, make required federal tax deposits for the current and last two quarters
“Before your offer can be considered, you must (1) file all tax returns you are legally required to file, (2) have received a bill for at least one tax debt included on your offer, (3) make all required estimated tax payments for the current year, and (4) if you are a business owner with employees, make all required federal tax deposits for the current quarter and the two preceding quarters.”
“If you or your business is currently in an open bankruptcy proceeding, you are not eligible to apply for an offer. Any resolution of your outstanding tax debts generally must take place within the context of your bankruptcy proceeding.”
“Use the Offer in Compromise Pre-Qualifier Tool to check your eligibility and prepare a preliminary offer.”
“Please note the eligibility determination provided by these tools does not guarantee that your Offer in Compromise will be accepted.”
The IRS Offer in Compromise Pre-Qualifier tool is at https://irs.treasury.gov/oic_pre_qualifier/.
While an offer is pending
The IRS page says that once it confirms eligibility and processes the application it suspends most collection activities, extends the collection period and may file a notice of federal tax lien. The Form 656 Booklet says penalties and interest continue to accrue, and that the IRS may levy assets up to the time it signs and acknowledges the offer as pending.
IRS wording
If we confirm your eligibility and process your application:
- You will receive a notification
- We may request additional information to complete our investigation
- We suspend most collection activities
- We extend your collection period
- We may file a notice of federal tax lien
“You must continue making all required OIC payments during the application process. You do not need to make payments on an existing payment plan for the same balance due.”
“Penalties and interest will continue to accrue while your offer is considered by the IRS.”
“The IRS may levy your assets up to the time the IRS official signs and acknowledges your offer as pending. In addition, the IRS may keep any proceeds received from the levy.”
“The IRS may file a NFTL at any time. You may be entitled to file an appeal under the Collection Appeals Program (CAP) before this occurs or request a Collection Due Process hearing after this occurs.”
“Your application will be automatically approved if we do not accept or reject it within two years. This two-year window begins when we receive your application and does not include the time during an appeal.”
The federal tax lien is explained on the IRS tax lien page.
If the offer is accepted, rejected or returned
The IRS says an accepted offer must meet all the terms in Section 7 of Form 656, and a rejected offer’s application fee is not returned and the rejection can be appealed. If the applicant is not eligible, the IRS page says it returns the application and application fee and applies the payments to the tax debt; the Form 656 Booklet says that generally, payments made on an offer will not be returned.
IRS wording
If your application is accepted
- You must meet all offer terms in Section 7 of Form 656 to keep your OIC
- We won’t release federal tax liens until your OIC is paid in full
- Some of your offer information will be publicly available in the public inspection file
“If the IRS accepts your offer, you must continue to stay current with all tax filing and payment obligations through the fifth year after your offer is accepted. Failure to meet your filing and payment obligations during this period may result in the IRS defaulting your offer.”
If your application is rejected
- The application fee will not be returned
- Any payments will be applied to your balance due
- You can appeal your rejected OIC with the IRS Independent Office of Appeals
“If you apply and are not eligible, we will return your application and application fee. Your lump sum or periodic payment(s) will be applied to your tax debt.”
“Generally, payments made on an offer will not be returned.”
What the IRS says about offer in compromise promoters
The IRS says promoters charge fees for a deal a taxpayer could get by working directly with the IRS, and that a taxpayer can check eligibility for free with the Pre-Qualifier tool.
IRS wording
“Promoters on radio and TV claim they can settle your tax debt for cheap with an offer in compromise. In reality, you pay the promoter for what you can do yourself with the IRS.”
“You can settle a tax debt directly with us if you’re eligible for an offer in compromise (OIC).”
“In reality, the promoter fees are often excessive, and taxpayers pay the OIC mill to get the same deal they could have received on their own by working directly with the IRS.”
“A taxpayer can check their eligibility for free using the IRS's Offer in Compromise Pre-Qualifier tool.”
The 2011 and 2012 changes to offers in compromise that the IRS announced under the name Fresh Start are on the IRS Fresh Start page.
Frequently asked questions
How much is the IRS offer in compromise application fee?
$205. The IRS Offer in compromise page (reviewed 19-Oct-2026) says every application requires a $205 application fee and a first payment unless the low-income qualifications are met, and the Form 656 Booklet (Rev. 4-2026) says the same. Only individuals qualify for consideration of the low-income qualification.
How much is the first payment on an offer in compromise?
It depends on the payment option. For a lump sum offer the IRS says to pay 20% of the offer amount when applying, with the rest in 5 or fewer payments within 5 or fewer months of acceptance. For a periodic payment offer the first payment comes with the offer and the balance is paid monthly within 6 to 24 months. Arithmetic on the 20% rule for a sample $10,000 offer: $2,000 initial payment plus the $205 fee is $2,205 due with the application, and $8,000 remains. Applicants who meet the low-income qualifications are covered by this Booklet sentence: “If you are an individual and meet the Low-Income Certification guidelines, there is no requirement to submit any offer payments or the application fee upon submission or during the consideration of your offer.”
What is the low-income certification for an offer in compromise?
Form 656 (Rev. 4-2026) says an individual or sole proprietor qualifies if adjusted gross income (or household gross monthly income times 12) is equal to or less than the chart amount for the family size and location, for example $39,900 for one person in the 48 contiguous states, D.C. and U.S. Territories. Those who qualify are not required to submit any payments or the application fee on submission or during consideration of the offer, and the IRS verifies whether the certification applies. The form puts a business other than a sole proprietor, and an offer filed for a deceased individual, outside Low-Income Certification. The form’s notice reads: “IF YOU QUALIFY FOR THE LOW-INCOME CERTIFICATION DO NOT INCLUDE ANY PAYMENTS WITH YOUR OFFER. Generally these payments will not be returned and will be applied to the tax liability in the best interest of the government.”
Who is eligible to apply for an offer in compromise?
The IRS Offer in compromise page lists four conditions: file all required tax returns, make required estimated tax payments, not be in an open bankruptcy and, for employers, make required federal tax deposits for the current and last two quarters. The Form 656 Booklet adds a bill for at least one tax debt included on the offer. The IRS also says generally it will not accept an offer when the debt can be paid in full.
Does the IRS stop collecting while an offer is pending?
The IRS page says that once it confirms eligibility and processes the application, it suspends most collection activities and extends the collection period, and that it may file a notice of federal tax lien. The Form 656 Booklet says penalties and interest continue to accrue while an offer is considered and that the IRS may levy assets up to the time it signs and acknowledges the offer as pending.
What happens if the IRS rejects the offer?
The IRS page says the application fee is not returned, any payments are applied to the balance due, and a rejected offer can be appealed with the IRS Independent Office of Appeals. A returned application is a separate case: “If you apply and are not eligible, we will return your application and application fee.” The IRS page adds that the lump sum or periodic payments are applied to the tax debt, and the Form 656 Booklet says: “Generally, payments made on an offer will not be returned.”
Is there a free way to check an offer in compromise before applying?
The IRS Offer in Compromise Pre-Qualifier tool is linked from the IRS page and the booklet to check eligibility and prepare a preliminary offer. The booklet says the result the tool gives is not a promise of acceptance. The IRS says a taxpayer can check eligibility for free with it (IR-2023-63).
Related pages
Sources
Every quotation, fee, amount and date above comes from these irs.gov documents, which we saved on November 2, 2026. The date or revision each document printed is shown with it.
- Offer in compromise (page last reviewed or updated 19-Oct-2026)
- Form 656 Booklet, Offer in Compromise (Form 656-B (Rev. 4-2026))
- Tax scams (page last reviewed or updated 17-Oct-2026)
- IR-2023-63, Offer in Compromise mills (news release dated March 30, 2023)
Reviewed November 2, 2026. Sums on this page are arithmetic on the IRS’s numbers and are labelled as such.