The Internal Revenue Service announced another expansion of its “Fresh Start” initiative on May 21, 2012 by offering more flexible terms to its Offer in Compromise (OIC) program. This means that the standards will be much more relaxed. Thus, more offers will be accepted and the processing time (which can take up to a year or longer, but averages about six months) will also be reduced.
The first step in getting your Offer in Compromise accepted is getting your proposal marked “processable,” which means you have satisfied all the minimum threshold requirements to be eligible to qualify for an OIC. It takes the IRS about 3-6 weeks in order to decide if your OIC is “processable” or not.
Next, your OIC is delivered to an IRS Offer in Compromise Examiner, who sends out a letter to you in about 4-6 weeks stating who they are and their contact information.
Following that, the OIC Examiner will determine what your Reasonable Collection Potential (RCP) is over the remaining collection period by analyzing the documents you sent in and auditing your assets to figure out what those are worth. Depending on the complexity, this can take anywhere from 4 weeks to 8 months.
Finally, your proposed amount will either be accepted or rejected by the Examiner. If your Offer in Compromise is accepted, the process likely took about 6-8 months. If your Offer in Compromise is rejected, you can appeal the rejection to the IRS office of Appeals, which would likely extend the entire Offer in Compromise processing time to about 14-24 months.