If the IRS accepts an offer in compromise, settling a tax debt takes 6 to 8 months. If the agency rejects the offer, then accepts it on appeal, the process takes 8 to 12 months.
The IRS Offer in Compromise Program
The Offer in Compromise Program is a way to settle the federal tax debt, but the IRS must first accept your offer. Once accepted, taxpayers can settle their tax debt for less than the amount owed. When taxpayers owe unpaid taxes to the IRS, they have up to 10 years to settle the debt. Although penalties and interest start accruing the day after taxes are due, the IRS may temporarily suspended collection during an offer in compromise request. If the offer is denied, collection efforts will be suspended for another 30 days during an appeal.
From start to finish, it may take up to 12 months or longer to settle a tax debt through an offer in compromise program, because the process must be completed in steps:
Step 1 – Deeming the Offer Processable
Step 1 takes approximately 3 to 6 weeks. Taxpayers submit an Income Certification for Offer in Compromise Application Fee and Payment, along with an installment payment equal to 20% of the offer. The taxpayer must also prove that he/she is not in an open bankruptcy proceeding.
Step 2 – Assignment of an IRS Examiner
Step 2 takes approximately 4 to 8 weeks. After authorities deem the offer processable, an IRS examiner will be assigned to the case. The agency will mails letters with the name of the examiner and contact information indicating that the IRS received the offer.
Step 3 – Examination
Step 3 can take from 1 to 8 months, depending on the complexity of the examination. During this process, the examiner acts as an auditor. He/she will go through all submitted documents and determine the taxpayer’s total worth, including income and assets.
Step 4 – Acceptance or Denial of Offer
If the IRS accepts your offer, step 4 can take from 6 to 8 months. During this step, the examiner will accept or deny the taxpayer’s offer. If agents reject the offer, the examiner may present an opportunity for the taxpayer to increase his/her offer or file an appeal.