What Fresh Start changed in 2012
An offer in compromise settles a tax liability for less than the full amount. The IRS generally accepts one when the amount offered equals the most it could expect to collect within a reasonable period. Before 2012, that calculation counted four or five years of future income, which put an offer out of reach for most wage earners.
On May 21, 2012, in release IR-2012-53, the IRS made the calculation less severe.
- Future income is counted for one year when the offer is paid in five or fewer months (it had been four years).
- Future income is counted for two years when the offer is paid in six to 24 months (it had been five years).
- Student loan payments and payments on delinquent state and local taxes can be allowed as expenses.
- The miscellaneous allowance was widened to cover items such as credit card payments and bank fees.
- Equity in income-producing assets is generally left out for a business that is still operating.
The 2026 rules at a glance
The current terms come from Form 656-B, the offer booklet, revised April 2026.
| Item | Rule |
|---|---|
| Application fee | $205, non-refundable |
| Lump sum offer | 20% of the offer with the application; the rest in 5 or fewer payments within 5 or fewer months of acceptance |
| Periodic payment offer | First payment with the application; monthly payments continue during review; balance paid within 6 to 24 months |
| Future income multiplier | Remaining monthly income x 12 for a lump sum offer, x 24 for a periodic offer |
| Low-Income Certification | No application fee, no initial payment and no payments during review |
| How to file | Individuals can file online in their IRS Individual Online Account or by mail; businesses mail Form 656 and Form 433-B (OIC) |
| If rejected | Appeal within 30 days on Form 13711 |
| After acceptance | File and pay everything due for five years, or the offer defaults |
How the minimum offer is worked out
The booklet's worksheet has two parts. The first is the equity in what you own. The second is your remaining monthly income, which is income less the expenses the IRS allows, multiplied by 12 or 24. Add the two and you have the minimum offer.
The allowed expenses are where most of the argument lies, because the IRS uses published standards for food, housing, transport and health care, not what you actually spend. Our page on what the offer formula asks goes through the calculation, the three legal grounds and the alternatives in depth.
Illustrative example. Someone with $4,000 of equity and $150 of remaining monthly income has a minimum lump sum offer of $4,000 + ($150 x 12) = $5,800, or $4,000 + ($150 x 24) = $7,600 as a periodic offer. If that same person owes $6,000, a lump sum offer saves almost nothing and a payment plan is the better route.
Who is eligible to apply
The IRS returns an application it cannot process, along with the fee, and applies any payment sent to the balance. To be processed, you must meet all of these.
- All required tax returns are filed and all required estimated payments are made.
- You are not in an open bankruptcy proceeding.
- You have a valid extension for a current-year return, if you are applying for the current year.
- If you are an employer, you have made tax deposits for the current quarter and the two before it.
What happens while the IRS reviews an offer
After acceptance, the IRS keeps refunds for returns assessed before the acceptance date, and it does not release liens until the offer terms are met. Certain details of accepted offers are available for public inspection.
- Your payments and fee are applied to the liability and are not refunded if the offer fails.
- The IRS may file a Notice of Federal Tax Lien.
- Other collection activity is suspended.
- The collection period is extended, which matters if the offer is later rejected.
- You do not have to make payments on an existing installment agreement.
- The offer is treated as accepted if the IRS makes no determination within two years of receiving it.
How many offers are accepted
The IRS Data Book for fiscal year 2025 reports 38,797 offers received and 5,464 accepted, worth $98.1 million. For fiscal year 2024 the counts were 33,591 and 7,199. Dividing one figure by the other does not give an acceptance rate, because offers accepted in a year were often filed in an earlier one. What the counts do show is that an offer is the exception. In the same year the IRS set up 3,160,047 new installment agreements.
The IRS lists aggressive offer marketing, which it calls "OIC mills," on its 2026 Dirty Dozen list, and it tells taxpayers to check the qualifications of any professional they hire for an offer. Before paying anyone, use the free IRS Pre-Qualifier tool or your online account to see whether you are even eligible. Do you need a tax relief company? covers what to ask.
Where we come in
An offer stands or falls on the numbers, so the useful work happens before anything is filed. We read the transcripts for every open year, work out the collection statute date for each assessment, and prepare the Collection Information Statement with its documents. Then we tell you in writing whether the figures support an offer, a payment plan or hardship status. We give you a scope and a price in writing before anything starts.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on October 1, 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
