Although the image of IRS has greatly improved in recent years, it is still considered to be a little inflexible when it comes to accepting offers in compromise. A tax bill cannot be reduced in any circumstance according to the law, but there are exceptions in every matter. Your OIC application will be accepted only if you provide evidence that you cannot pay the specified tax bill and that your monthly income is below the poverty guidelines.

Nearly half of the applications made for an OIC are rejected because they do not fulfill the above requirements. But if your case is genuine and you can provide necessary documents to support your claim there is no need to worry about IRS. The OIC application can take as long as two years to get processed by the IRS. You have to fill out a form (Form 656 – Offer in Compromise) and then attach a fee of $150 with it.

In addition to this form you have to submit a Collection Information Statement. OIC is a more serious undertaking than installments agreement and all the forms should be filled out with care. After this the IRS will ask you to produce past bank statements, pay stubs and so on. All other financial documentation is to be provided by you in order to give them an insight into your financial position.