How to Reapply or Modify an Existing Offer in Compromise

Introduction
An Offer in Compromise (OIC) can permanently resolve a tax debt for less than the full amount owed. But life changes—loss of income, medical bills, or a new job—can affect both your ability to pay and the IRS’s original decision. This article explains your options if an OIC is rejected, how to reapply, and what to do if you need to modify an accepted OIC. It also covers what happens if an OIC goes into default and practical steps to improve your chances of success.

Quick eligibility recap
To consider reapplying or asking for a modification, you should understand the basic OIC eligibility expectations:

• File all required tax returns. The IRS will generally not consider an OIC if returns are missing.
• Be current on estimated tax and federal tax deposit requirements (for businesses) for the year you apply.
• Demonstrate doubt as to collectibility, doubt as to liability, or qualify under effective tax administration (ETA).
  For details on the application forms and financial worksheets, see the IRS Offer in Compromise page: https://www.irs.gov/payments/offer-in-compromise.

When to appeal a rejected OIC vs. when to reapply
If the IRS rejects your offer, the rejection letter will explain why and will normally tell you whether you have the right to appeal. You generally have 30 days from the date on the rejection letter to request an appeal using Form 13711 (Offer in Compromise Appeal Request). An appeal is appropriate when you believe the IRS misapplied the rules, miscalculated your ability to pay, or overlooked documentation you already submitted.

When to submit a new OIC instead of appealing:

• The rejection was due to missing documents you can now provide.
• Your financial situation has materially changed since your last submission (for example, lower income, increased allowable expenses, or major medical expenses).
• The IRS rejected the offer as too low and you want to propose a higher but still reduced amount.

Steps to appeal a rejection

1. Read the rejection letter carefully and note deadlines. The letter should include appeal rights and the appeals contact.
2. Complete Form 13711 and write a concise statement explaining the specific factual or legal errors you believe the IRS made.
3. Attach any omitted supporting documents (bank records, medical bills, updated pay stubs) and mail everything by the deadline.
4. If you need help, consider a tax professional with OIC experience; they can prepare and submit the appeal packet.

Submitting a new OIC: what changed and what stays the same
If you choose to reapply, don’t just resend the old package. The IRS rejected it for reasons—address those directly.

• Fix compliance issues: File missing returns and bring payroll tax deposits or estimated taxes up to date.
• Update financial statements: Recalculate using current income and expense figures and complete the correct forms (Form 656 plus Form 433-series worksheets as required).
• Consider the payment option: A lump-sum cash offer requires 20% of the offer with the application; a periodic payment offer requires the first proposed installment with the application and continuing payments while the offer is pending. Application fee rules and low-income waivers are explained on the IRS OIC page and Form 656 instructions.

Forms and documentation you’ll likely need

• Form 656, Offer in Compromise (and the related Form 656-B if qualifying on income)
• Form 433-A (OIC) or Form 433-F as instructed (collection information statements)
• A copy of your most recent tax returns
• Proof of income and expenses (pay stubs, bank statements, bills)
• Medical bills, childcare costs, or other documentation of extraordinary expenses
  FinHelp’s guides on Form 656 and qualifying for an OIC can help you assemble a stronger package: https://finhelp.io/glossary/form-656-offer-in-compromise/ and https://finhelp.io/glossary/qualifying-for-an-offer-in-compromise/.

Requesting a modification of an accepted OIC
If the IRS accepted your OIC but your financial situation changes before the offer is paid in full or before the statutory collection period ends, the IRS may consider a modification. Typical reasons for requesting a modification include:

• A significant and sustained drop in income (job loss or reduced hours)
• Unexpected medical expenses or other large, non-discretionary costs
• A change that materially affects your ability to meet the original payment schedule
  How to request a modification

1. Contact the IRS office or assigned examiner listed on your OIC acceptance letter (Letter 3220C).
2. Explain the change and request instructions for submitting a modification request.
3. Provide current supporting documentation: recent pay stubs, employer termination letters, bank statements, medical bills, or other evidence.
4. The IRS may ask you to complete a new financial statement (Form 656-B or an updated Form 433-series).
   If the IRS approves the modification, you’ll receive new terms in writing. If the IRS denies the request, you must comply with the original terms or risk default.

What happens if an OIC defaults or is voided
An OIC can be voided (treated as in default) if you:

• Fail to make the agreed payments on time,
• Fail to file required tax returns while the OIC is in effect,
• Fail to make required estimated tax payments,
• Incur a new tax liability and don’t stay current on it.
  When an OIC is voided, the IRS reopens collection of the full original liability plus interest and penalties that accrued while the offer was in effect. Generally you cannot simply “modify” a voided OIC—you will need to address the default (often by paying or negotiating another resolution). In many cases, the next practical steps are to submit a new OIC, apply for an installment agreement, or request Currently Not Collectible status. For guidance about OIC defaults and official IRS letters, FinHelp’s pages on OIC letters are useful: https://finhelp.io/glossary/letter-2604c-rejection-of-offer-in-compromise/ and https://finhelp.io/glossary/letter-3220c-offer-in-compromise-acceptance/.

Options if you can’t meet the original OIC terms and the IRS denies a modification

• Negotiate an installment agreement for the remaining balance (if acceptable to the IRS).
• Ask the IRS to place your account in Currently Not Collectible status if you have no ability to pay.
• Consult a tax professional to explore bankruptcy implications—some tax debts may be dischargeable depending on timing and circumstances, but this is complex and fact-specific.

Practical tips to strengthen a reapplication or modification request

• Be transparent and consistent: Provide complete, accurate documentation. The IRS verifies bank records, wages, and assets.
• Address the rejection reasons point-by-point in a cover letter.
• Use accurate market values for assets; don’t understate equity in property or vehicles.
• Consider selling nonexempt assets if feasible—demonstrating a good-faith effort can improve credibility.
• If you qualify as a low-income taxpayer, ask about application fee waivers and reductions for payment options.
• Work with a tax professional (CPA, Enrolled Agent, or tax attorney) who has OIC experience. They can help prepare financial statements, estimate collectible equity, and represent you in appeals or modification discussions.

Timeline and processing expectations
The IRS processing time for an OIC varies. Typical reviews take four to six months, but complex cases or those requiring verification can take longer. Appeals can add several months. If you reapply, expect a fresh review cycle. Keep up with required filings and payments while you wait.

Frequently asked questions
Q: How long after a rejected OIC can I reapply? A: There’s no formal waiting period to submit a new OIC, but you should only reapply after correcting the deficiency that caused the rejection (for example, filing missing returns or collecting required documentation).

Q: Does an accepted OIC show up on my credit report? A: The IRS does not directly report OICs to credit bureaus, but public records (like tax liens) previously filed may affect your credit. If the IRS files a Notice of Federal Tax Lien before resolution, that lien can appear on public records until released.

Q: What if my OIC was accepted but I later get audited? A: An audit could change your tax liability. If an audit results in a different tax due for the years covered by the OIC, the IRS may seek additional payment or adjust the OIC terms.

Resources and next steps

• Official IRS OIC guidance and forms: https://www.irs.gov/payments/offer-in-compromise
• Form 656 instructions and Form 13711 (appeal) are available at the IRS forms page linked above.
• FinHelp articles to deepen your understanding: “Form 656, Offer in Compromise” (https://finhelp.io/glossary/form-656-offer-in-compromise/), “Appealing a Rejected OIC” (https://finhelp.io/glossary/appealing-a-rejected-oic/), and “Offer in Compromise Application Fee” (https://finhelp.io/glossary/offer-in-compromise-application-fee/).

Final note
Reapplying or requesting a modification is often a matter of clear documentation, timely communication, and addressing the IRS’s specific reasons for rejection. If your case is complicated, professional representation can help avoid common pitfalls and shorten the time to a workable resolution.