IRS Offer in Compromise Forms and Supporting Documentation: A 2026 Guide
What an Offer in Compromise Is
An Offer in Compromise, or OIC, is the IRS program that lets you settle your tax debt for less than the full amount you owe, when you genuinely cannot pay it in full. I want to set expectations honestly before we get into the paperwork, because this is where people get hurt. The IRS does not accept an offer because you ask nicely. It accepts an offer when the amount you propose is at least what it believes it could reasonably collect from you over time, what it calls your Reasonable Collection Potential. The forms exist to prove that number. Get the forms and the documentation right and you have a real shot. Get them wrong and the offer comes back unread.
What a Real Offer Looks Like
I want to show you this is real, not a late-night TV promise. Over 25 years running CuraDebt's tax work, our in-house team handled a lot of these before we moved to matching people with independent tax firms. A few real Offer in Compromise outcomes from those years:
- A business owner owed $55,000 and settled it for $676.
- A woman in New York owed $89,000 and settled for $100.
- A caregiver supporting his ill mother owed $135,000 and settled for $4,380.
- A couple living overseas on Social Security owed $71,420 and settled for $5,044.
Now read that the right way. These are real, but they are not typical, and nobody should expect them. Every one of those people had a financial picture that genuinely supported a low offer, and every number was documented. That is the whole point of the forms and the paperwork I am about to walk you through. The settlement is not magic, it is math you have to prove. You can see more real tax case results here. Results vary, and the IRS decides every case on its own facts.
The Forms You Need
An Offer in Compromise is not one form, it is a package. Here is the complete set for 2026, with links to the official forms on IRS.gov. Always download the current version directly from the IRS, the figures and low-income thresholds change each year (the current revision is Rev. 4-2026).
| Form | What it is | Who uses it |
|---|---|---|
| Form 656-B (booklet) | Bundles Form 656, both 433 forms, instructions, and the checklist. The kit you actually send in. | Everyone, start here |
| Form 656 | The offer itself: tax debt, amount offered, payment terms (inside 656-B) | Everyone |
| Form 433-A (OIC) | Financial disclosure that sets your minimum offer (inside 656-B) | Individuals, wage earners, self-employed |
| Form 433-B (OIC) | Business financial disclosure (inside 656-B) | Corporations, partnerships, LLCs |
| Form 656-L | Used only when you dispute that you owe the tax at all (Doubt as to Liability) | Liability disputes only |
| Form 13711 | Request to appeal a rejected offer, within 30 days | If your offer is rejected |
Important: if you are an individual or sole proprietor, download the full Form 656-B booklet from IRS.gov and submit the whole booklet. A standalone Form 656 on its own is missing the financial statement, the fee voucher, and the low-income worksheet, and the IRS will return it as incomplete. You can also start the process through your IRS Individual Online Account.
Form 656, the Offer
Form 656 is the heart of the application. It identifies the tax types and periods you want to compromise, the total amount you are offering, and how you intend to pay it, either as a lump sum or in periodic payments. One detail trips people up: if you have both individual and business tax debt, you generally need a separate Form 656 for each, and a separate fee and initial payment with each.
Your offer amount cannot be a number you simply hope the IRS accepts. It has to be at least the figure that comes out of your Form 433 financial disclosure, unless you have documented special circumstances. That is why you complete the 433 first and the 656 second, the 433 produces the number that the 656 reports.
Form 433-A (OIC) and 433-B (OIC)
This is where the real work happens. Form 433-A (OIC) for individuals, or 433-B (OIC) for businesses, is the detailed financial statement the IRS uses to calculate what it could collect from you. It asks for your income, your monthly living expenses against the IRS's own allowable standards, and the value of your assets, including bank accounts, vehicles, real estate, retirement accounts, and digital assets.
Assets are generally valued at fair market value, and for many assets the IRS uses a quick-sale value of around 80 percent minus any loan balance. Every figure on this form needs to be supported by a document, which leads directly to the next section. If your 433 says you have $2,000 in the bank, your bank statement needs to show it.
The Form 433 produces a number using a set formula. Understanding it helps you know whether an offer is realistic before you file:
Minimum offer = asset equity + (monthly remaining income × 12 or 24)
Use ×12 if you will pay within 5 months (lump sum), or ×24 if you will pay over 6 to 24 months (periodic). For example, with $3,000 in asset equity and $150 left each month after allowable expenses:
- Lump sum: $3,000 + ($150 × 12) = $4,800
- Periodic: $3,000 + ($150 × 24) = $6,600
Your offer generally must be at least this amount, unless you document special circumstances. Want to estimate your own number first? Use our Offer in Compromise payment estimator.
Supporting Documentation Checklist
This is the part people underestimate, and it is the most common reason an offer is returned. The IRS will not take your word for any number on the 433. You substantiate each one with a photocopy, never the original. Here is what is typically required:
- Bank statements: the three most recent months for each account, more for business accounts.
- Income proof: recent pay stubs, plus 1099s, K-1s, or Social Security and pension statements.
- Asset valuations: current values for vehicles, real estate, and other valuable items, with documentation.
- Loan and mortgage statements: the most recent statement showing balances and monthly payments for anything used as collateral.
- Expense proof: documentation for the living expenses you claim, especially anything above the IRS standards, such as medical costs or court-ordered payments.
- Business documents: a current profit and loss statement and accounts receivable records if you are filing 433-B (OIC).
- Special circumstances: any records that support a hardship or unusual situation you are asking the IRS to weigh.
The rule I give people is simple: every dollar figure on your 433 should have a piece of paper behind it. If it does not, expect a delay or a return.
Tick these off as you gather them. Every dollar figure on your Form 433 should have a document behind it.
Send photocopies, never originals. An incomplete package is returned without review.
How to Do an Offer in Compromise, Step by Step
Here is the order I would follow, and the sequence matters:
- Confirm you are eligible: you must have filed all required tax returns, not be in an open bankruptcy, and, if you have employees, be current on federal tax deposits.
- Check your numbers first: before filling anything out, estimate what the IRS would likely expect, so you are not applying for an offer you cannot qualify for. Our Offer in Compromise payment estimator can give you a rough read.
- Gather your documents: pull the bank statements, pay stubs, and asset records described above first, so the forms go quickly.
- Complete Form 433 first, then Form 656: the 433 produces your minimum offer amount, which the 656 reports.
- Include the fee and initial payment: the 2026 application fee is $205 per offer, plus an initial payment, both non-refundable, unless you qualify for the Low-Income Certification, which waives them.
- Submit the complete package: mail it to the IRS center listed in Form 656-B, or file online through your IRS Individual Online Account.
Why Offers Get Returned
An offer being returned is different from being rejected. Returned means the IRS never even evaluated it, usually because something was missing, and you have to start over. After 25 years I can tell you the returns almost always come from the same handful of issues: a missing signature, an unsigned or outdated form, a financial figure with no document behind it, leaving out the fee or initial payment, or not being current on your tax filings. None of these are about the strength of your case. They are paperwork failures, and they are completely avoidable.
Should You Even Apply?
I would rather save you the application fee than watch you submit an offer that was never going to work, so here is the honest filter.
- You genuinely cannot pay the full balance, now or over time
- Your income barely covers, or does not cover, allowable living expenses
- You do not have significant equity in assets
- All your tax returns are filed and you are out of bankruptcy
- You can document every number you claim
- You could realistically pay through an installment plan
- You have substantial home or asset equity
- Your income comfortably exceeds your allowable expenses
- You have unfiled returns or an open bankruptcy
- You are relying on a "pennies on the dollar" promise
If you do not qualify for an offer, that is not the end of the road. An installment agreement or Currently Not Collectible status may be the better path, and you can learn how an IRS payment plan works.
Doing It Yourself vs Getting Help
You can absolutely file an Offer in Compromise yourself. The forms are public, the instructions are in Form 656-B, and plenty of people do it without help, especially straightforward cases. I would never tell you to hire someone you do not need.
Where a firm earns its fee is the complexity: getting the 433 financial disclosure right so the offer amount is as low as the rules allow, documenting special circumstances persuasively, and handling a return or a rejection appeal. CuraDebt does not prepare your offer itself. Based on your situation, CuraDebt uses 25 years of experience to match you with an independent, licensed tax relief firm in its network. You can read more on our tax debt relief page and learn how to choose a tax resolution company.
Frequently Asked Questions
What forms do I need for an IRS Offer in Compromise?
What supporting documents do I have to send with an OIC?
How do I do an Offer in Compromise?
How much is the Offer in Compromise application fee in 2026?
Why do Offers in Compromise get returned or rejected?
How long does an Offer in Compromise take?
Can I file an Offer in Compromise myself?
This is general education from 25 years in the debt relief business, not tax or legal advice for your specific situation. IRS forms, fees, and thresholds change, so always confirm against the current Form 656-B booklet on IRS.gov before submitting. CuraDebt is a matching service that connects people with licensed tax relief providers in its network; it does not prepare Offer in Compromise applications itself. Please consult a qualified tax professional about your own situation.
