What are the requirements to qualify for an Offer in Compromise?

To be eligible for an IRS Offer in Compromise, you must meet these requirements: (1) All required tax returns must be filed (you cannot submit an OIC with unfiled returns), (2) All required estimated tax payments for the current year must be current, (3) You must not be in an open bankruptcy proceeding, (4) You must have a valid extension for the current year's return if it's not yet due, and (5) If you have employees, all federal tax deposits for the current quarter must be current. Additionally, the IRS uses the OIC Pre-Qualifier tool (on IRS.gov) to determine preliminary eligibility. The IRS will generally not accept an OIC if: it believes you can pay the full amount through an installment agreement within the collection statute, your offer amount is less than your Reasonable Collection Potential (RCP), you have significant equity in assets that could be liquidated, or you have significant future earning potential. The application requires Form 656 (Offer in Compromise), Form 433-A (OIC) for individuals or 433-B (OIC) for businesses, $205 application fee, and the initial payment (20% for lump sum or first monthly payment for periodic offers).