Updated November 2026 · VG CPA PC advisors
Types of offers
Most offers are based on doubt as to collectibility: you cannot pay the full amount within the collection period. Offers can also be based on doubt as to liability, when the tax itself is wrong, or on effective tax administration, when paying would cause exceptional hardship even though you technically could pay.
Before filing, you must have filed all required returns, be current on estimated payments and federal tax deposits for the current year, and not be in an open bankruptcy.
How the IRS calculates the offer
The minimum acceptable offer is your reasonable collection potential: the net equity in your assets, using quick-sale values, plus your future disposable income. Future income is your monthly income minus allowable living expenses under IRS standards, multiplied by 12 for a lump-sum offer paid within five months or 24 for a periodic payment offer.
Assets include bank accounts, retirement accounts, vehicles, real estate and business equipment. Because the IRS uses national and local expense standards, careful documentation of actual necessary expenses can make a large difference.
Filing and what happens next
Offers are filed on Form 656 with Form 433-A (OIC) and, for businesses, Form 433-B (OIC), along with an application fee and an initial payment: 20% of a lump-sum offer, or the first monthly payment for a periodic offer. Low-income taxpayers can be exempt from the fee and payments.
While the offer is pending, levies generally stop and the collection statute is extended. An offer not decided within 24 months is deemed accepted. If accepted, you must file and pay on time for five years or the offer can be defaulted.