Offer in Compromise Timeline: What Happens After You File?

Key Takeaways

• There are six steps in the timeline once you submit an Offer in Compromise to the IRS.
• In total, these steps can last anywhere from a few months to two years.
• Whether your offer is accepted, rejected, or returned, you’ll walk away knowing what to expect next and how to stay on top of the process.

Why the Timeline Matters

Submitting your Offer in Compromise (OIC) to the IRS might feel like crossing the finish line. You gathered all your financial records, completed the forms, and mailed your offer. But in reality, that’s only the starting point of a longer process.

Once the IRS receives your offer, it enters a multi-step review period that can take several months. Your documents will be scrutinized, your finances double-checked, and you may be asked to clarify or update information. Few offers are accepted. Many are rejected. Others are returned without ever being reviewed because of a technicality.

Whether you’re waiting for an answer or just planning ahead, knowing the timeline helps you stay prepared, avoid mistakes, and stay in good standing with the IRS.

IRS Receipt and Processability Check

After you submit your offer using Form 656, the IRS begins by checking whether your submission can be processed. This initial screening takes place at one of the two Centralized Offer in Compromise Units, either in Brookhaven, New York or Memphis, Tennessee.

Here’s what the IRS looks for right away:

• Did you include a signed Form 656?
• Did you include the $205 application fee (unless you qualify for a low-income waiver)?
• Did you send the first required payment if you didn’t claim the waiver?
• Have you filed all required federal tax returns?
• Are you currently in bankruptcy? (If yes, your offer is automatically ineligible)

If your offer is missing any of these, it will be returned without consideration. This is called a returned offer, not a rejection. You won’t get a full review. Instead, you’ll have to correct the issue and resubmit a brand-new offer package.

If your offer passes the processability test, you’ll receive a notice from the IRS confirming that your offer is now “pending.” This acknowledgment letter typically arrives within 30 days. It confirms that the IRS has accepted your offer for consideration and that your case is in the queue for full review.

Length of time: 2 to 4 weeks after IRS receives your offer

Assignment to a Specialist for Initial Review

Once the IRS accepts your offer as processable, it is assigned to a trained Offer Specialist or Offer Examiner. This person will lead the evaluation of your case. Your file might stay with the Centralized Offer Unit, or it could be transferred to a local field office. The IRS makes that decision based on the complexity of your case and available staffing.

The Offer Specialist begins with an initial review of your submitted documents. Their job at this stage is to verify that everything you reported is accurate, consistent, and complete. They’ll look at the financial information you provided in Form 433-A (OIC) or 433-B (OIC) and check it against IRS records and third-party data.

This includes:

• Verifying reported income and assets
• Cross-checking bank accounts and property ownership
• Looking for any missing or inconsistent information
• Determining if you are in “payment compliance” – that is, your withholding and estimated tax payments are sufficient so that you will not owe in the future.
• Making an initial determination if you can pay in full and do not qualify for an OIC

At this point, it’s common to receive a letter or phone call requesting clarification or updated records. The IRS may ask for more recent pay stubs, bank statements, or other documents to support your original offer.  They may also ask you to correct your withholding or make estimated tax payments to continue your offer.  The IRS usually gives you a short time to respond- and if you don’t respond before the deadline, the Offer Specialist can reject your application.

Receiving a request for more information is not a bad sign. It means your case is active. However, delays in your response (or incomplete answers) can stall your case or lead to a return. Staying organized and replying quickly can help keep your offer moving forward.

Length of time: 2 to 6 weeks after offer is marked “pending”

Deep Financial Evaluation Using IRS Formulas

This is the core of the review process. Assuming you qualify for an OIC from the initial review, the Offer Specialist will now perform a detailed evaluation to determine your Reasonable Collection Potential (RCP) or how much you need to offer to settle. This is the amount the IRS believes it could collect from you, either by seizing your assets or through future income before the collection statute expires.

To calculate your RCP, the IRS uses a specific formula:

• The realizable value of your assets, discounted to account for quick-sale value, plus
• Your future disposable income, multiplied by 12 or 24 months depending on the type of offer you submitted

Disposable income is the money left after subtracting allowable living expenses from your monthly income. But “allowable” doesn’t always mean what you think is fair or necessary. The IRS uses published standards to cap what you can claim in key categories like:

• Food, clothing, and personal care (based on household size)
• Housing and utilities (based on county and number of people in your home)
• Vehicle ownership and operating costs (based on location and number of cars)

The IRS will also verify everything you report. This can include checking public records, comparing your income to previous tax returns, and even contacting third parties. They may ask you to explain recent bank deposits, vehicle ownership, or changes in employment.

This stage can last several months, especially if documents are missing or inconsistent. If you respond quickly and thoroughly to every request, the IRS is more likely to move forward without additional delays. But if you ignore requests or submit incomplete paperwork, your offer may be returned or flagged for closure.

Length of time: 2 to 6 months (or longer if documents are missing)

Responding to IRS Requests for More Information

During the Offer in Compromise review process, it’s normal to receive requests from the IRS for additional documents or clarifications. These requests are not a sign that your offer is in trouble. They’re part of how the IRS confirms whether your financial disclosures are accurate and complete.

You might be asked to provide:

• Additional proof of income
• Bank statements for all listed accounts
• Proof of expenses, such as rent, utilities, or loan payments
• Documentation for self-employment income, like income and expenses from your profit and loss statement
• Explanations for specific deposits, asset transfers, or omissions

These letters often have short response deadlines (typically 15 to 30 days) and the IRS expects full cooperation. If you ignore the request or miss the deadline, the IRS may return your offer without further review. That ends your current case and forces you to start over.

The most common reason for delay at this stage is incomplete responses. If you send only some of the documents or forget to sign a verification form, the IRS won’t move your case forward. It’s important to submit everything requested in one organized, labeled package. Include a brief cover letter that identifies your case number and lists the enclosed documents. The Offer Specialist will often provide you a fax number to respond quickly.

If you need more time to respond, contact the Offer Specialist listed in the letter. The IRS may grant a short extension, but they expect regular communication. Silence or delay can lead to closure of your case, even if your offer was on track for approval.

A few best practices:

• Always keep copies of what you submitted
• Maintain a folder with updated financial documents, even after filing your offer
• Log every IRS request and your response date

Cooperation and transparency are key. This is not a negotiation stage; it’s documentation. The faster and more accurately you supply what’s needed, the more likely the IRS will complete their review and move on to a decision.

Length of time: 15 to 30 days per request (can extend overall timeline by weeks or months)

The IRS Decision — Accept, Reject, or Return

After reviewing your financials and all supporting documentation, the IRS will make a decision. This can take several months from the time your offer was marked “pending.” There are three possible outcomes: acceptance, rejection, or return.

1. Acceptance

If the IRS agrees that your offer represents the most they can reasonably expect to collect before the statute of limitations runs out, they will issue an acceptance letter. This is the outcome most people hope for, but statistically, it’s rare.

An acceptance letter outlines the offer terms you must now follow, including:

• Payment schedule (either a lump sum or monthly installments)
• Ongoing tax compliance rules, such as filing all future returns on time and paying any new taxes in full for the next five years
• Other terms to complete, called a collateral agreement.  For example, the IRS may ask you to give up a carry forward deduction on your future tax returns

If you fail to meet these future compliance requirements, the IRS can revoke the agreement and reinstate the full tax debt.

2. Rejection

If the IRS decides your offer is too low based on their calculation of your Reasonable Collection Potential (RCP), they will issue a rejection letter. This letter explains why your offer was not accepted and provides instructions on how to appeal.

You have 30 days from the date of the rejection letter to file an appeal using Form 13711, Request for Appeal of Offer in Compromise. Many taxpayers file an appeal to provide updated information or clarify financial circumstances. If your situation has changed (ex: job loss or illness) you may be able to strengthen your case during the appeal process.

3. Return Without Consideration

This is different from a rejection. A returned offer means the IRS stopped processing your case, usually because:

• You failed to respond to document requests
• You fell behind on estimated tax payments during the review
• You entered bankruptcy after submitting your offer
• You didn’t meet the basic eligibility requirements (such as having all returns filed)

Returned offers are not appealable. If your offer is returned, the case is closed. You must submit a brand-new offer and pay the $205 application fee again unless you qualify for a waiver.

The decision stage is pivotal. Whether you receive an acceptance, a rejection, or a return, what you do next matters just as much as what you submitted. In the next section, we’ll cover what happens after the IRS accepts your offer and how to stay in good standing.

Length of time: 1 to 2 months after final documents are received

What Happens After Acceptance

If you’re one of the few whose Offer in Compromise is accepted, congratulations. Your journey with the IRS isn’t over. Acceptance comes with specific responsibilities that last well beyond the payment itself.

Start Making Payments Immediately

If you offered a lump sum, you’ll need to pay the remaining balance (after the initial 20 percent you submitted with Form 656) in no more than five payments within five months of acceptance.

If you chose the periodic payment plan, you’ll need to stick to the schedule proposed in your offer. Payments typically continue over six to 24 months, depending on what you submitted. The IRS will hold you to that plan unless you make an early payoff.

Stay Compliant for Five Full Years

This is one of the most overlooked parts of a successful OIC: you must file and pay all federal taxes on time for the next five years. If you fail to do this, even by a small amount, the IRS can void your offer agreement and reinstate the full tax debt, including penalties and interest.

Compliance includes:

• Filing your federal tax returns on time
• Paying any new taxes in full and by the due date
• Making all estimated payments if you’re self-employed
• Avoiding new tax debts or penalties

If you file late or owe money next year, the IRS won’t send a warning. They’ll just revoke your offer.

Federal Tax Liens May Not Be Immediately Released

If a federal tax lien was filed against you before your offer was accepted, it may remain in place until your offer is fully paid. Once the balance is satisfied, the IRS will typically release the lien within 30 days, but you must request it using Form 668(Z) or work with your Offer Specialist for resolution.

Immediate action required; 5-year compliance period begins

What Happens After Rejection or Return

If your offer is rejected or returned, it’s important to understand the difference between the two and what to do next.

If the IRS Rejects Your Offer

A rejection means the IRS reviewed your financials and decided you can pay more than you offered. This is common, as most OICs are rejected based on the IRS’s Reasonable Collection Potential (RCP) calculation.

You have options:

• Appeal the rejection using Form 13711 within 30 days. If your circumstances have changed, or if you believe the IRS made a mistake in how it calculated your RCP, the appeals process gives you another chance to be heard.
• Adjust your offer and resubmit. Some taxpayers revise their offer amount upward and file a new OIC that better aligns with the IRS’s assessment.

In either case, it helps to speak with a qualified tax professional who understands how the IRS evaluates offers and can help you strategize next steps.

If the IRS Returns Your Offer

A returned offer wasn’t fully reviewed. It was disqualified from consideration due to:

• Unfiled tax returns
• Missed estimated payments (if self-employed)
• Bankruptcy status
• Failure to respond to document requests
• A previously closed case where conditions weren’t met

Returned offers can’t be appealed. You’ll need to fix the problem and start over from scratch with a new application and fee.

Many taxpayers who receive a return mistakenly believe their offer was denied. But in reality, the IRS simply stopped processing it because basic qualifications weren’t met.

Where Most Taxpayers End Up

Whether your offer is rejected or returned, the IRS still expects you to resolve your tax debt. Many taxpayers transition into other resolution options, including:

• Installment Agreements (monthly payment plans)
• Currently Not Collectible (CNC) status if you have no ability to pay
• Partial Pay Installment Agreements, which allow reduced monthly payments without a formal OIC

In fact, most people who attempt an OIC ultimately use one of these methods instead. Offers in Compromise may get the spotlight, but they are not the most common path to resolution.

Total length of time: Appeals: up to 10 months; new offers or installment agreements vary

Conclusion: What to Do While You Wait (and If You Don’t Qualify)

The OIC process takes time, energy, and patience. Even after you file, the IRS timeline can stretch for months, and only a minority of offers are accepted. But regardless of the outcome, the process gives you something valuable: a full picture of your financial standing in the IRS’s eyes.

While you wait for a decision:

• File all future tax returns on time
• Make estimated payments if you’re self-employed
• Respond quickly to IRS requests
• Keep your financial documents organized and up to date

And if your offer isn’t accepted, don’t give up. The insights you gain during this process can help you qualify for other options, like installment agreements or CNC status.