IRS Offer in Compromise Success Rate

Facing a hefty tax bill from the IRS can be one of life’s most stressful financial challenges. Fortunately, the IRS Offer in Compromise (OIC) program exists to give taxpayers a real chance at settling tax debt for less than what’s owed. But before you jump in, it’s important to understand the success rate of OIC applications—and what impacts your chances. At QMK Consulting, we’ve helped numerous franchise and restaurant owners in New York City navigate these complexities with confidence. Let’s explore what the IRS Offer in Compromise success rate truly means for you and how you can improve your chances of success.

What Is an IRS Offer in Compromise?

An Offer in Compromise is essentially the IRS saying, “We’re willing to settle your tax debt for less than what you owe, but only if it’s the most we can reasonably expect to collect.” This program is designed for taxpayers who are genuinely struggling—those who cannot pay their full tax debt without causing severe financial hardship to themselves or their business.

Because the IRS uses a detailed formula called Reasonable Collection Potential (RCP) to decide what amount you can realistically pay, the success of your OIC depends on matching their expectations. Knowing how the program works before applying can save you time, stress, and even money.

The Current IRS Offer in Compromise Success Rate

If you’re wondering how often the IRS actually accepts these offers, recent IRS data paints an honest picture. Typically, only about 30 to 40% of submitted OIC applications get approved. In the last full fiscal year, for example, out of roughly 50,000 offers filed, just over 15,000 were accepted.

While this might feel discouraging, it reflects the IRS’s responsibility to balance taxpayer relief with fair debt collection. The fact that many applications are rejected is a sign that understanding eligibility and preparation are key before you submit your proposal.

Why the Success Rate Is Relatively Low

Why does the IRS say no to so many Offer in Compromise applications? Here are some common reasons:

• Many taxpayers apply hoping to settle “for pennies on the dollar” without fully meeting the IRS’s strict eligibility requirements.
• Applications are often incomplete or contain errors, leaving the IRS unable to process them properly.
• Misunderstanding the IRS’s Reasonable Collection Potential formula can lead to unrealistic offers that don’t reflect the taxpayer’s true ability to pay.
• Advertisements promising easy tax “debt settlements” create false expectations that hurt applicants when their offers are denied.

Factors That Increase Chances of Success

Though the odds may seem daunting, there are clear steps you can take to improve your chances:

• Be fully tax compliant. This means having all your tax returns filed and staying current on any payments or agreements.
• Provide thorough documentation of your income, expenses, assets, and liabilities. The IRS needs a clear financial picture.
• Your offer should at least meet the amount calculated by the IRS’s Reasonable Collection Potential formula.
• Clearly show why paying your full tax debt would cause undue hardship, such as job loss, medical expenses, or other serious financial struggles.

Common Reasons for OIC Rejection

There are some pitfalls to watch out for that often lead to immediate denial:

• Not filing all required tax returns before submitting your offer.
• Exaggerating expenses or concealing income to appear less able to pay.
• Neglecting to pay the non-refundable $205 application fee and initial offer payment when required.
• Offering a sum far below what your financial situation realistically supports.

Tips to Improve Your Success Rate

If you’re considering applying for an Offer in Compromise, these practical tips can help:

• Use the IRS’s free OIC Pre-Qualifier tool online to get a quick sense of your eligibility before applying.
• Consider a lump sum offer instead of spreading payments over time—offers paid in full upfront typically get accepted more often.
• Work with a tax professional who understands IRS OIC guidelines and can accurately calculate your Reasonable Collection Potential.
• After your offer is accepted, continue to stay compliant with all tax filings and payments to avoid defaulting on the agreement.

Alternatives if Your OIC Isn’t Accepted

If your Offer in Compromise isn’t approved, don’t lose hope. There are other options to help you manage your IRS debt:

• Installment Agreement: Spread out your payments over a manageable period.
• Currently Not Collectible (CNC) Status: Temporarily pause collections if your financial situation is dire.
• Partial Payment Installment Agreement: Make smaller payments over time to chip away at your debt.
• Bankruptcy: As a last resort, certain tax debts may be discharged under bankruptcy, though this is complex and less common.

Conclusion

The IRS Offer in Compromise can be an incredible tool to regain control over your financial future, but it requires careful preparation and a clear understanding of your eligibility. At QMK Consulting, we specialize in franchise and restaurant accounting, helping clients make informed decisions about tax debt solutions. We know the ins and outs of this process and can guide you toward the best path for your unique financial situation.

FAQs

What percentage of OICs does the IRS accept?

The IRS accepts around 30–40% of OIC applications, though this can vary each year depending on IRS policies and funding.

Why does the IRS reject so many OIC applications?

Rejections usually happen because applications are incomplete, inaccurate, or the taxpayer doesn’t meet the eligibility requirements.

How do I know if I’m a good candidate for an OIC?

Using the IRS’s pre-qualifier tool or consulting with a seasoned tax professional can help determine your eligibility.

Does hiring a tax professional improve success rates?

Absolutely. A professional ensures your offer is realistic, complete, and compliant, increasing your chances of approval.

Can I appeal if the IRS rejects my OIC?

Yes, you have the right to appeal through the IRS appeals process, which can give your offer a second look.

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If you’re a franchise owner, restaurant operator, or business professional in New York City grappling with tax debt, we invite you to take advantage of a free profit and cash flow analysis with Mohamed Karmous, our expert in franchise and restaurant accounting. At QMK Consulting, we tailor financial strategies to help you manage tax obligations and grow your business with confidence. Don’t let tax debt hold you back—schedule your free consultation with us today and start building a stronger financial future.

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For further insights on managing franchise tax challenges across multiple locations, we recommend reading Franchise Tax Planning Across States in 2025. This post breaks down key tax considerations, planning strategies, and updates impacting franchise owners operating in multiple states and countries.