Overview

A denial of an Offer in Compromise (OIC) is common but not final. The IRS sends a written decision that explains the reasons for denial and the deadlines for next steps. In my practice helping taxpayers with OICs, many denials are reversed or resolved after clarifying documentation or choosing a different collection solution.

Immediate actions (first 30 days)

  • Read the denial letter carefully and note the specific reason(s) the IRS cites.
  • If you want to appeal, file Form 13711, “Request for Appeal of Offer in Compromise,” within 30 days of the date on the denial letter (see IRS instructions: https://www.irs.gov/forms-pubs/about-form-13711).
  • If you won’t appeal, decide whether to submit a new OIC, ask for reconsideration, or pursue an alternative collection option.

Appeal the denial

  • Use Form 13711 to ask the IRS Independent Office of Appeals to review the denial. Appeals are a paper and documentation-driven process; focus your submission on the specific errors or missing evidence cited in the denial.
  • There’s no guaranteed processing time; appeals can take weeks to months. If you file an appeal, keep paying any required installments and follow notice instructions from the IRS.

Reapply or request reconsideration

Consider reasonable alternatives to an OIC

  • Installment agreement: If you can pay over time, an installment agreement can stop enforced collection and spread payments. Compare pros and cons with an OIC in our article: “Offer in Compromise vs Partial Payment Installment Agreements: Pros and Cons” (https://finhelp.io/glossary/offer-in-compromise-vs-partial-payment-installment-agreements-pros-and-cons/).
  • Currently Not Collectible (CNC) status: If paying would create severe hardship, request CNC; the IRS may temporarily halt collection while the tax remains owed.
  • Bankruptcy: In limited situations, bankruptcy can discharge certain older tax debts. Consult a bankruptcy attorney before pursuing this path.

Timing and practical expectations

  • Deadlines matter: 30 days to appeal. If you miss the appeal window you can still submit a new OIC or negotiate, but you lose the administrative appeal right tied to that denial.
  • Appeals and reconsiderations vary by complexity; expect processing from a few weeks to several months.

Documentation and common mistakes

  • Common denial causes: omitted income, inaccurate asset valuations, incomplete bank or expense records, or math errors.
  • Best practice checklist:
  • Pull the denial letter and identify each reason cited.
  • Collect bank statements, pay stubs, bills, medical records, and documentation for assets.
  • Correct any tax return errors before reapplying.
  • Use itemized, dated evidence—don’t rely on estimates without backup.

Professional help and representation

  • Consider hiring a CPA, enrolled agent (EA), or tax attorney experienced in OICs and appeals. If you retain representation, file Form 2848 (Power of Attorney) so your representative can communicate with the IRS.
  • If you face severe delays, economic hardship, or systemic IRS issues, contact the Taxpayer Advocate Service (TAS): https://www.irs.gov/advocate (TAS helps taxpayers facing financial difficulty or unresolved IRS problems).

Practical tips from my practice

  • Be proactive: respond within the timelines on IRS letters and don’t let notices stack up.
  • Focus appeals on concrete, verifiable facts the IRS missed or misvalued.
  • When reapplying, tighten your financial statement—small omissions often trigger denials.

Common misconceptions

  • Misconception: “A denial means I have no options.” Wrong: appeal, reapply with new evidence, or pursue alternative collection relief.
  • Misconception: “Reapplying always costs another fee.” If you qualify under low-income certification you may avoid the application fee—follow IRS guidelines: https://www.irs.gov/payments/offer-in-compromise.

Next-step checklist (actionable)

  1. Read the denial letter and mark the 30-day appeal deadline.
  2. Decide: appeal (Form 13711), reapply, or pursue alternatives.
  3. Gather supporting documents that address the IRS’s denial reasons.
  4. If hiring help, file Form 2848 to authorize your representative.
  5. Contact the Taxpayer Advocate Service only if you meet TAS criteria and you’ve exhausted regular IRS channels.

Authoritative sources

Professional disclaimer

This content is educational and does not constitute legal or tax advice. For guidance tailored to your situation, consult a qualified tax professional, CPA, enrolled agent, or tax attorney.