IRS “Currently Not Collectible” (CNC): What It Is and How to Qualify

What Is an IRS Offer in Compromise?

An IRS Offer in Compromise (OIC) allows eligible taxpayers to settle their tax debt for less than the full amount owed. It is designed for people who cannot pay their full liability or for whom doing so would create financial hardship.

While the program can be life-changing, not everyone qualifies. The IRS accepts only a small percentage of OIC applications each year.

Who Qualifies for an Offer in Compromise?

The IRS looks at your ability to pay, income, expenses, and asset equity. You may be eligible if:

• You cannot pay your full tax debt before the collection period ends.
• Paying in full would create significant financial hardship.
• You are current on all filing and payment requirements.
• You are not in an active bankruptcy proceeding.

Use the IRS Offer in Compromise Pre-Qualifier Tool to see if you may qualify.

How to Apply for an Offer in Compromise

Applying for an OIC requires detailed financial documentation. The steps include:

• Complete Form 656 and Form 433-A (OIC) for individuals, or Form 433-B (OIC) for businesses.
• Include the required application fee (currently $205) unless you qualify for low-income certification.
• Submit your initial payment (lump sum or first installment, depending on your offer type).

For official IRS guidance, visit the Offer in Compromise page.

Types of Offers in Compromise

• Lump Sum Cash Offer – Pay 20% upfront and the balance in five or fewer payments within five months.
• Periodic Payment Offer – Make monthly installments over a longer period while the IRS reviews your offer.

Frequently Asked Questions

How long does an OIC take to process?

The IRS may take 6 to 12 months (or longer) to review an OIC application.

Will applying stop IRS collections?

Yes. While your OIC is under review, the IRS generally suspends collection activities such as levies.

What if my offer is rejected?

You can appeal a rejection within 30 days using Form 13711, Request for Appeal of Offer in Compromise.

Bottom Line

An IRS Offer in Compromise can help you settle tax debt for less, but qualifying is difficult and the process can be lengthy. Before applying, explore alternatives such as IRS payment plans. For full details, visit the official IRS Offer in Compromise page.

Need more time to file? File your federal tax extension quickly and easily at TaxExtension.com.