The Math
The IRS calculates your Reasonable Collection Potential: equity in assets (at quick-sale value) plus future disposable income (monthly surplus times 12 or 24 months). Your offer must meet or exceed that number. If the RCP is $8,000 and you owe $80,000, an offer near $8,000 can work on the numbers. It is mathematical, not emotional.
Who Qualifies
Taxpayers whose RCP is significantly less than their total debt. Low income, few assets, high allowable expenses. The IRS will not accept an OIC from someone who can clearly afford to pay in full. But many taxpayers who think they do not qualify are surprised by how low their RCP actually is.
The Process
Form 656, Form 433-A (OIC), the application fee, an initial payment, and stacks of financial documentation. Review takes months, not weeks. Collection is generally suspended during review. If accepted, you must stay compliant for five years.
The TV Commercial Lie
Nobody settles for "pennies on the dollar" with a phone call. Real OICs require detailed financial disclosure, accurate documentation, and patience. Companies that guarantee specific results before reviewing your finances are selling hope, not service.
An OIC is not a loophole. It is a legitimate program for taxpayers who genuinely cannot pay in full. The math determines everything.
This guide is general information about federal tax law, not legal advice for your situation. Reading it does not create an attorney-client relationship.