Are you buried deep under back taxes? Wouldn’t it be just great to escape your owed taxes and have a breath of fresh air? Well, this just might be possible for you. It isn’t as good as a royal pardon or a clean slate, but good enough to lessen the burden from your aching shoulders. The IRS has come up with an initiative called ‘offer in compromise’, through which your tax debts and overwhelming tax liabilities can be reduced or “partially forgiven”. Who wouldn’t like to avail such an offer?

But before you set out on the road for tax forgiveness, you should know that settling your unpaid taxes is not an easy task; it is complicated and time consuming. This blog will make things simpler by helping you find how long does an offer in compromise take, and all its related procedures.

If you have IRS tax problems and need help, please call us at 407-502-2400, or email us at [email protected].

What is an Offer in Compromise?

Put simply, the IRS cannot really collect more taxes from a taxpayer than his/her payment ability which is why an offer in compromise presents the perfect opportunity to both the taxpayers and the IRS to make the most of their troubling situation. The taxpayers get a reduction on the taxes while the IRS also gets “something” out of the taxpayer rather than nothing at all. It is important to understand what exactly does the Offer in Compromise mean before finding out how long does an offer in compromise take.

An offer in compromise is also known as the “fresh start initiative”, which gives the taxpayers an opportunity to pay reduced taxes than the sum that they currently owe the IRS. Considering the financial hardships of the taxpayer, the IRS partially forgives the unpaid taxes. The reason why it is called the fresh start initiative is that it gives people a substantial chance to turn over a new leaf and remain current on the taxes in the future.

But despite the fact that it may seem like the perfect chance to pull you out of the puddle, you must assess your expectations. To give you a brief idea about how long does an offer in compromise take, it would be apt to point out that the IRS moves really slowly with the entire process. If your mind is bubbling with questions like, “What is a typical time window for the processing of an offer in compromise?” or “What are the challenges that you will face during the application process?”, then be assured that you have come to the right place to ease your mind.

The Offer in Compromise Basis

To know how long an offer in compromise takes, you must first know the ground rules under which an offer in compromise can be availed.

  1. There is uncertain liability that the IRS has made some errors in estimating your taxes. This one is rarely granted. The compromise is only struck if there is a genuine dispute.
  2. There is a doubt to collectability. This means that there is an uncertainty related to the total amount payable which means that the total amount might not be able to be collected during the statute of limitations period. In such cases, the taxpayer has the ability to pay back something but the total income is considerably less than the tax liabilities. The amount payable is then negotiated between the IRS and the taxpayer.
  3. Effective tax administration determines that the taxpayer can pay the taxes but after the payment, he/she will be subjected to a financial hardship.

Why Should You File for an Offer in Compromise?

While pondering over how long does an offer in compromise take, you should also know the advantages associated with the fresh initiative program. You will be elated to know that:

  • All of the previous IRS tax debt will be settled
  • The general collection of the tax will cease temporarily until the offer in compromise process is pending
  • The federal tax liens will also be released when the offer is accepted and the required payments are made

If you have IRS tax problems and need help, please call us at 407-502-2400, or email us at [email protected]

The Building Block of Offer in Compromise: Make a Solid Application

Figuring out how long does an offer in compromise takes will come after you have submitted a solid application with the required documents. The right application and offer can make the difference between an approved and a rejected offer. Following are the requirements for submitting an application for an offer on compromise:

  • You have submitted the $186 application fee which is non refundable
  • Form 656 (s) – the business and the individual tax debt must be submitted on a separate form along with the initial payment (non refundable)
  • You have submitted either one of the following initial payments:
    • 20% lump sum offer
    • The payment of the first installment and continue to pay monthly installments while the IRS is still reviewing your application.
  • Form 433-A or Form 433-B with all the necessary documents
  • You are not in a state of bankruptcy
  • You are not able to pay the monthly installments according to the partial payment installment

Now you must be wondering how long does an offer in compromise take, once you have submitted your application. Well, there is no definite answer to the question but generally the processing window is three to six weeks at most. During this time, the IRS makes a decision regarding your application.

So now that you know how long does an offer in compromise takes for application processing, you must know that:

  • Your offer should be competitive in order to stand a chance.
  • You should take help from a specialized firm that deals in taxation or else you will consume more time and spend money in the down payments which cannot be retrieved.

What Offer Should You Really Make?

Deliberating over what offer you should make in order to get your application successful is more important than knowing “how long does an offer in compromise take”. According to the IRS, the minimum amount that you should offer must be equivalent to your Reasonable Collection Potential (RCP) as estimated by the IRS, or greater than it. However there are special circumstances where the IRS will be compelled to accept the offer less than the RCP. It is only acceptable when paying more it would put the taxpayer in a severe financial hardship.

Assignment of an IRS Examiner

After your offer in compromise is submitted, it is forwarded to a specialized examiner at the IRS to have a closer look at your application. Now if you are wondering how long does the offer in compromise take in order for you to get a letter from the compromise examiner, you should know that the time frame for this is approximately four to six weeks. In simple terms, the letter will just state the details about the compromise examiner along with the contact details. The compromise examiners are dispersed all across the United States.

What does it mean to receive the letter?

While thinking about how long will your offer in compromise take to be processed, you better open your letter. The letter is sent to notify you that a dedicated source will be contacting you for more information if required by your application process. You should keep your fingers crossed and hope for the best.

The Real Ordeal: The Actual Examination

Okay, so now you are more than half way through the process. All those deliberating over how long does an offer in compromise take, must be aware in advance, that this is the time period which can stretch quite a lot. It is now that the examiner starts scrutinizing your documents, as well as your offer. Understanding the duties and the tasks executed by the compromise officer will assist you in finding how long your offer in compromise will take. The compromise examiner will:

  • Assess your true income
  • Audit your assets
  • Find the worth of everything that you own

All of this analysis is done to know your Reasonable Collection Potential over the collection period. The IRS, however, is super smart. They will never settle for less following some shady paperwork you filed. What the IRS basically wants from you is money and wants to settle things in an amicable way. Otherwise, it will not be difficult for the IRS to extract the money as per the RCP forcefully. To answer how long an offer in compromise takes with a definite answer is really difficult, for it really depends upon the complexity of the situation that you are currently in. Apart from the nature of the complexity, it also largely depends upon the compromise officer or examiner that you have been assigned. Thusthere isn’t a single answer which will tell you how long will your offer in compromise take for sure. But broadly speaking, if we fit a time window, it takes anywhere between 6 to 8 months.

If you have IRS tax problems and need help, please call us at 407-502-2400, or email us at [email protected].

Combating Rejection of the Proposed Amount

After a thorough examination, the compromise examiner might either accept your offer or reject it. If you want to know the answer to the question how long does an offer in compromise take, you should be aware that the time duration will automatically increase if  the examiner rejects the amount you proposed. Just in case your offer has been rejected, you should bring forward any counter arguments that you can come up with. Raising your claims is important but at the same time, this is a perfect opportunity for you to slightly raise your offer and enter into a bargain. If you don’t know how long does an offer in compromise takes and your offer is accepted, you should know that the maximum time that it would take is eight months.

Now, if your offer is rejected and you are called forth for a rebuttal, it will obviously take longer. So if your offer is rejected and you want to know the answer for how long would your offer in compromise take, take a seat and lay low, as it could take a year (at least) until acceptance.

Summing it all up for all those curious to know the answer to the question how long does an offer in compromise take, it can be said that the minimum time required is around six months and the maximum time is up to a year. This extensive duration points out in two directions:

  • Filing an offer is a comprehensive process and that the overwhelming investigation process is certainly time consuming
  • You should prepare a flawless offer, one that does not have a slightest chance of being rejected if you do not want to face an offer rejection.

Should You Appeal?

Another thing to keep in consideration when evaluating how long an offer in compromise takes is the time required for you to make an appeal against ultimate rejection. The IRS allows you to make an appeal just in case your offer was rejected. You can make an appeal at the “IRS Office of Appeals”. By this time you will have argued your case thoroughly. This is good in a way for now you know that you have to tackle all your well-documented issues.

Apart from the question how long does an offer in compromise take, your mind will also be full of questions about your appeal and its consideration. Well, the officer at the IRS Office of Appeals is more likely to accept the rejected offer if:

  • You are able to convince them about your true collection potential
  • Your reasons are documented well for clarity and are tangible

With an appeal, the answer to the question how long does an offer in compromise take changes again. The entire process can even consume another two months to a complete year. So yes, filing an offer in compromise is indeed a daunting task. You should never really proceed at filing without any professional assistance as a lot of things could go wrong and you could face a possible rejection.

Expectations from a Qualified Offer in Compromise Taxpayer

After knowing the estimated time frames for your question how long does an offer in compromise take, it is also important for you to realize what the IRS expects of you if you qualify for the fresh initiative program:

  • You will have to file the tax returns punctually for the next five years. If you fail to comply, the original taxes will get invoked with additional penalties and interests.
  • At the time of filing, the taxpayer will have to file other taxes that are due.
  • Monthly installments will also have to be paid on time.

What are the Reasons for the Return or Rejection of the Offer in Compromise?

All those who are curious to know the answer to the question how long does an offer in compromise take should also know the reasons which might make their application unacceptable. These may include:

  • The offer in compromise is filed only to escape or delay enforcement actions. That is, after it has been communicated to the taxpayer that collection will be enforced through a seizure or levy.
  • The applicant taxpayer clearly has the ability to pay more than the offer specified and there aren’t any special conditions.
  • The taxpayer once again submits an offer in compromise that is quite similar to the previous one which was returned or rejected with a right to appeal.
  • The taxpayer files again within a year of receiving a termination letter and have not yet resolved the previous default condition.
  • The offer in comprise is returned in the investigation or examination phase if the taxpayer fails to show evidence of compliance to the estimated tax installments or neglects to pay them entirely.

Hopefully by now you know how long would an offer in compromise take in different cases; approval, rejection and appeal. If you did not qualify for the offer in compromise program, you can apply for Penalty Abatement or could enter into a Partial Payment Installment Agreement.

If you have IRS tax problems and need help, please call us at 407-502-2400, or email us at [email protected].


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