An IRS Offer in Compromise (OIC) can sound like the perfect escape from tax debt, but in practice, it’s often far from ideal. The eligibility rules are strict, the process is slow, and the odds of approval are not in most taxpayers’ favor.
While it’s understandable to want quick relief from the pressure of an IRS balance, it’s important to weigh the drawbacks of an OIC before committing. In many cases, there are faster, more reliable options that can bring you to the same outcome without the delays and uncertainty.
Why an OIC Can Be Problematic?
• The review process is slow—typically 12 to 18 months.
• Even after waiting, the IRS rejects more than half of all offers submitted.
• Approval depends on a detailed financial analysis of your income, expenses, assets, and debts under formulas that rarely favor taxpayers.
• The time the IRS spends reviewing your OIC extends its collection statute.
Normally, the IRS has 10 years from assessment to collect a debt, but an OIC investigation “pauses the clock,” giving the IRS more time to pursue you. With those disadvantages in mind, here are three proven strategies that often work better than an OIC.
1. Partial Pay Installment Agreement (PPIA): A PPIA allows you to make monthly payments for only part of the total balance until the IRS’s collection statute expires. Unlike an OIC, the collection clock keeps running.
For example, if you owe $50,000 and the IRS has two years left to collect, you might agree to pay $100 per month. Over two years, you’d pay $2,400, after which the remaining balance is legally uncollectible. The debt is cleared without tolling the statute or risking rejection after a lengthy review.
2. Currently Not Collectible (CNC) Status: If paying anything toward your tax debt would cause significant financial hardship, the IRS may declare your account “currently not collectible.”
In CNC status, you make no payments while the 10-year statute of limitations continues to run. If the statute expires while you remain in CNC, the IRS writes off the remaining balance. Like a PPIA, this option avoids delays and keeps the expiration date intact.
3. Strategic Inaction (“Staying Low”): Sometimes, the best move is to take no action—provided you’re not in immediate danger of enforcement. The IRS cannot levy your wages, bank accounts, or property without first sending a Final Notice of Intent to Levy and giving you the chance to request a Collection Due Process Hearing.
If that notice hasn’t been issued, you may not be at risk of an imminent levy. In that case, it may be possible to remain under the radar, allow the statute to run, and then confirm with IRS records that the debt has been cleared.
Bottom Line: While an Offer in Compromise remains one tool in the tax resolution toolbox, its long processing time, low approval rate, and impact on the collection statute make it less appealing in many situations. Partial Pay Installment Agreements, Currently Not Collectible status, and strategic inaction can all use the statute of limitations to your advantage—often achieving the same debt resolution goal with less hassle and greater certainty.