Offer in compromise (OIC) user fee changes

Final regulations on offers in compromise (OICs) increase user fees and provide a new way for low-income taxpayers to receive a waiver of the fee.

April 23, 2020

Final regulations on offer in compromise (OIC) application fees, announced by the IRS in news release IR-2020-55, increase user fees, and provide a new way for low-income taxpayers to have the fees waived. An OIC allows a taxpayer to settle an IRS tax debt for less than the full amount owed, generally because the taxpayer is considered unable to pay the debt in full. The final regulations make the following two changes:

  1. User fees. The user fee for processing OIC applications is increased from $186 to $205. The fee will continue to be waived for applications submitted solely because of doubt as to liability and for low-income taxpayers, explained next.
  2. Low-income taxpayers. For OIC purposes, “low-income” means that the taxpayer is at or below 250% of the federal poverty level (FPL). The IRS usually makes the low-income determination by looking at the taxpayer’s household size and gross monthly income. The final regulations provide an additional way for low-income taxpayers to receive a waiver of the fee. To reflect a change made by the Taxpayer First Act, the IRS can now look at AGI from the taxpayer’s most recent tax return to determine if the FPL standard is met.

The changes made by the final regulations are effective for OICs submitted on or after April 27, 2020.

For more information on OICs, including assistance during the COVID-19 pandemic, see What must a taxpayer do to be considered for an offer in compromise (OIC)? in the Tax Research Center.

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