Quick overview

When you ask the IRS for an Installment Agreement (IA) or an Offer in Compromise (OIC), you are asking them to accept a different payment outcome than full immediate payment. The IRS makes that decision based on a factual snapshot of your finances. That means the quality and completeness of your documentation directly affect whether your request is accepted, denied, or delayed.

This checklist explains which documents to gather, how the IRS uses each item, and practical tips I use in my tax-resolution practice to reduce processing time and avoid common rejections. For official guidance, see the IRS Installment Agreement page and the IRS Offer in Compromise page (irs.gov).

Why documentation matters

  • The IRS relies on declared income, allowable living expenses, and asset values to calculate a taxpayer’s “reasonable collection potential.” Good documentation reduces back-and-forth and strengthens your case.
  • Missing or inconsistent paperwork is the most common reason for denials or requests for additional information.
  • Accurate documentation can unlock less-burdensome options (for example, a streamlined Installment Agreement for qualifying balances).

Authoritative references: IRS — Installment Agreement Request (https://www.irs.gov/individuals/installment-agreement-request) and IRS — Offer in Compromise (https://www.irs.gov/individuals/offer-in-compromise).

Documentation checklist (what to gather)

  1. Tax returns and filing history
  • Filed federal tax returns for the last 3 years (individuals) or for the applicable business years. The IRS generally requires up-to-date filings to consider either program. (IRS: Installment Agreement Request)
  • Any IRS notices or transcripts that show assessed balances: account transcripts (Get Transcript Online or via Form 4506-T).
  1. Proof of identity and residency
  • Valid government ID (driver’s license, passport).
  • Social Security numbers for taxpayer and spouse (if applicable).
  • Recent utility bill or lease showing current address.
  1. Income documentation
  • Recent pay stubs (last 2–3 months) and year-to-date earnings.
  • Proof of other income: Social Security, unemployment, pension, annuities, rental income, child support, investment statements, K-1s, 1099s.
  • Business profit-and-loss statements and recent bank statements if self-employed.
  1. Expense documentation
  • Monthly living expenses: rent/mortgage statements, homeowner’s insurance, property tax bills, utilities, phone/internet, transportation costs (car payments, insurance, fuel), childcare, medical expenses not covered by insurance.
  • Receipts or canceled checks for recurring obligations the IRS will consider under allowable expense items. For businesses, provide operating expenses and payroll records.
  1. Asset documentation
  • Bank account statements for the last 3 months (checking, savings, money market).
  • Retirement account statements (401(k), IRA), brokerage statements, and valuations for real estate (recent mortgage statement and property tax bill).
  • Vehicle titles, loan statements, or valuations and documentation of other significant assets (boats, collectibles).
  1. Debts and liabilities
  • Credit card statements, personal loans, student loans, medical bills, and any court judgments.
  • Recent collection notices and proof of prior payments or settlement arrangements.
  1. Specific forms the IRS may require
  • Form 433-A (Collection Information Statement for Individuals) or Form 433-B (for Businesses) — these are common for OICs and many non-streamlined IAs.
  • Form 656 (Offer in Compromise) — the official application for OIC; include the required application fee and initial payment as described on the IRS OIC page.
  • Form 9465 (Installment Agreement Request) and online payment-agreement documentation when applying electronically.
  1. Proof of special circumstances
  • Medical records, disability statements, proof of recent job loss, reduction in hours, or other evidence of a significant change in financial condition.
  • Divorce decrees, child support orders, or bankruptcy filings that affect your ability to pay.
  1. Signed authorization (if using a representative)
  • Form 2848 (Power of Attorney) or Form 8821 (Tax Information Authorization) so a tax professional can communicate with the IRS on your behalf.

How the IRS uses these documents

  • Income, expenses, and assets inform the IRS calculation of reasonable collection potential (RCP). For an OIC, RCP is compared to the OIC amount to determine if the offer reflects all collectible resources.
  • For Installment Agreements, the IRS uses income and asset details to set a monthly payment that the taxpayer can reasonably meet without causing undue hardship.
  • Documents showing hardship or non-recurring expenses may increase allowable deductions; medical bills and certain secured debt payments can be considered.

Practical filing tips from my practice

  • Start early and be exhaustive. Incomplete packages cause delays; I typically prepare a two-page cover memo summarizing the key documents and the case facts to help the IRS reviewer.
  • Organize documents in labeled folders or a single PDF, with a table of contents. For electronic file uploads, name files clearly (e.g., “2024W2[TaxpayerName].pdf”).
  • Double-check dates and amounts against bank statements and transcripts. In practice, mismatches between stated income and third-party documents are the most frequent cause of additional information requests.
  • If you expect an OIC rejection, attach a short narrative explaining special circumstances (job loss, disaster, medical issue) and point to supporting evidence.
  • Use Form 2848 if you hire a practitioner — it speeds communications and reduces confusion when the IRS requests more information.

Checklist examples by scenario

  • Streamlined Installment Agreement (typically for low-balance cases): recent tax returns, proof of income (pay stubs), 3 months of bank statements, and Form 9465 or online application. (See IRS guidance on streamlined agreements.)
  • Offer in Compromise (lump-sum): Forms 656 and 433-A/B, 3 years of tax returns, bank statements, valuation of assets, 20% initial payment (when a lump-sum compromise is proposed) or the initial periodic payment, and the $205 application fee unless you qualify for a low-income waiver. See the IRS OIC page for current fee rules.
  • Partial-payment installment agreement: similar to an OIC in documentation (Form 433, asset schedules), because the IRS must be satisfied that a reduced-payment plan reflects ability to pay over time.

Note: Fee amounts and payment rules can change. Always confirm current fees and initial-payment rules on IRS.gov (IRS: Offer in Compromise).

Common mistakes to avoid

  • Sending unsigned forms or missing signatures on authorization forms (Form 656 requires a taxpayer signature).
  • Omitting bank statements, which the IRS frequently requests after initial submission.
  • Failing to file required tax returns before applying — the IRS often denies requests if returns are not current.
  • Using estimated values for assets without documentation. Provide appraisals or recent sales comps for real estate where possible.

Timelines, fees, and processing expectations

  • Processing times vary: simple Installment Agreements can be approved online or within a few weeks; OICs often take several months because they require closer review. In my experience, an OIC can take 4–12 months depending on case complexity and Appeals workload.
  • Application fees and initial payments for OICs are outlined on the IRS OIC page. Fee waivers are available for qualifying low-income taxpayers.
  • Keep current on tax filings and payments while your case is pending; failing to file future returns or pay required estimated taxes can lead to automatic denial or termination.

When to get professional help

If your case includes complex assets (business interests, multiple rental properties, large retirement holdings), or you have prior collection actions (levies, liens), consult a CPA or enrolled agent experienced in IRS collection matters. In my practice, properly documenting business cash flow and reconciling personal vs. business expenses is the single biggest factor in a successful negotiation.

Useful internal resources:

Closing checklist (printable)

  • [ ] Last 3 years of filed federal tax returns
  • [ ] Signed Form 656 (OIC) or Form 9465 (IA) as applicable
  • [ ] Completed Form 433-A or 433-B when required
  • [ ] Last 3 months of bank statements
  • [ ] Most recent pay stubs and proof of other income
  • [ ] Documentation of monthly expenses and recurring bills
  • [ ] Statements for retirement and investment accounts
  • [ ] Titles, mortgage statements, property tax bills
  • [ ] Copies of collection notices and IRS transcripts
  • [ ] Medical or hardship documentation, if applicable
  • [ ] Signed VOAs: Form 2848 or 8821 if using representation

Professional disclaimer: This article provides general information and a practical checklist based on official IRS guidance and my professional experience in tax resolution. It is not legal or tax advice for a specific situation. Confirm current fees, forms, and thresholds on IRS.gov or consult a qualified tax professional for personalized advice.

Authoritative sources

If you’d like, I can convert this checklist into a printable PDF or a fillable worksheet you can use when assembling your package.