Offer in Compromise (OIC) — Definition Glossary

Defined by Sarah Mitchell, CPA | Reviewed by: James Okafor, EA

Full Definition

An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS that settles a tax liability for less than the full amount owed. The IRS accepts OICs based on three grounds: Doubt as to Liability (the taxpayer disputes the tax assessment), Doubt as to Collectability (the IRS doubts it can collect the full amount given the taxpayer’s assets and income), and Effective Tax Administration (collection would create economic hardship). The OIC review process takes 12-24 months. During review, IRS enforcement is generally suspended. An OIC offer requires an initial payment of 20% (lump sum) or the first installment payment. Businesses that cannot afford the OIC payment but have a viable OIC case often use bridge financing to fund the offer.

Why This Matters for Businesses With Tax Debt

Understanding Offer in Compromise (OIC) is essential for any business owner navigating IRS enforcement. This term directly affects the options available for resolving business tax debt — including whether tax debt financing is available, how lien subordination works, and what enforcement the IRS can take.

Related Terms

Currently Not Collectible, Installment Agreement, Doubt as to Collectability

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Tax Funds connects businesses facing IRS enforcement with specialized financing solutions. If you are dealing with any of the situations described above, apply below — no obligation, no upfront fees.

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Type of Tax Debt *-- Select Tax Debt Type --IRS 941 Payroll Tax DebtFederal Tax LienIRS Bank Levy (Active Now)Trust Fund Recovery Penalty (TFRP)State Tax DebtOIC Bridge FinancingMultiple Types

Approximate Tax Debt Amount *-- Select Amount --$10,000 - $25,000$25,000 - $50,000$50,000 - $100,000$100,000 - $250,000$250,000 - $500,000$500,000+

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Sources: IRS.gov; Internal Revenue Code (IRC); IRS Publication 594 (The IRS Collection Process); IRS Publication 1 (Your Rights as a Taxpayer). Tax Funds is a financing marketplace — not a lender, CPA firm, or law firm. This content is for informational purposes only.