Overview

If your finances change after you’ve applied for or received an Offer in Compromise (OIC), you have options: update the IRS while your offer is pending, ask for reconsideration if your offer is already accepted but you can’t meet the terms, or reapply if your earlier offer was denied or no longer reflects your ability to pay. The IRS evaluates each case on the current facts — not on past estimates — so timely, accurate documentation is essential (IRS, Offer in Compromise).

This article explains practical steps for different stages of an OIC case, what documents the IRS expects, how long the process typically takes, and common mistakes I see in practice. I’ve helped clients reapply or modify offers after job losses, divorce, and major medical expenses; those real-world tips are woven throughout.

(For official IRS guidance, see the IRS Offer in Compromise page and the Offer in Compromise booklet.)

When to update or reapply: three common scenarios

  1. Pending offer (the IRS has not yet accepted or rejected): submit updated financial data immediately.
  2. Accepted offer but you cannot comply with payments: contact the IRS right away to request relief or explain changed circumstances.
  3. Denied or closed offer: decide whether to appeal, request reopening, or file a new OIC based on materially different facts.

Which path you take depends on timing and how large the change is. Small, temporary fluctuations may not change the IRS decision; substantial, sustained changes (job loss, large medical bills, divorce) are more likely to matter.

Step-by-step actions (practical checklist)

  1. Stop and organize: collect pay stubs, unemployment statements, bank statements, medical bills, divorce decree, or other proof of change.
  2. Choose the correct form: use Form 433-A (OIC) for individuals and Form 433-B (OIC) for businesses to report your current income, expenses, assets, and equity.
  3. Prepare a short cover letter: explain exactly what changed, when it happened, and why the previous offer no longer reflects your ability to pay.
  4. Send documents to the right place: submit updates to the IRS office handling your OIC (the letter you received will have contact info). If you don’t know the caseworker, mail to the general OIC unit address listed by the IRS and include your OIC case number (IRS, Offer in Compromise).
  5. Follow up: call the IRS OIC intake line if you don’t get a confirmation of receipt in 10–14 days.

In my practice, clients who provide a concise cover letter plus three months of new statements get faster, clearer results than those who send pages of unsorted paperwork.

What to include with a modification or reapplication

  • Updated Form 433-A (OIC) or 433-B (OIC).
  • A revised Form 656 if you’re submitting a materially different offer amount.
  • Proof of income change: final pay stubs, unemployment award letters, SS benefits statements.
  • Proof of new expenses: medical bills, court-ordered support, lease agreements, utility bills.
  • Asset documents: recent bank statements, retirement account statements, proof of sale or change in equity.
  • A short, factual cover letter summarizing the change and attaching a table of submitted documents.

Keep copies of everything you send and use certified mail or a tracked delivery service when possible.

How the IRS typically handles updates (what to expect)

  • If your offer is still pending, the IRS will usually incorporate updated financials into its review. Expect additional processing time — often several weeks to a few months — depending on workload and complexity (IRS processing can vary).
  • If your offer was accepted and you can’t meet the terms, the IRS expects you to contact them. They may: accept a revised payment plan, reopen the offer for consideration, or pursue collection if they determine the acceptance remains correct.
  • If your offer was denied, you can appeal the denial to the IRS Office of Appeals or consider filing a new offer based on material changes. See the FinHelp article on next steps after denial for options and timelines.

Typical timelines (approximate):

  • Receipt and acknowledgement: 1–3 weeks
  • IRS review of updated financials: 6–12 weeks (can be longer in complex cases)
  • Decision or request for more documentation: another 2–6 weeks

Reapplying vs modifying: which should you choose?

  • Modify (update your pending file): when the OIC is still under consideration and you can show a meaningful, sustained change.
  • Reapply (submit a new OIC/Form 656): when the earlier offer has been denied, closed, or when your new financial picture would justify a different offer amount.

There is no automatic “one-click” modification procedure — the IRS decides based on current documents. If in doubt, submit the updated forms and clearly label them as “Updated Financial Statement” or “Revised Offer.” If you already received a decision, include a request to reopen the case.

If your original offer was denied: practical options

  • Review the denial letter carefully for reasons and any appeals rights.
  • File an appeal with the Office of Appeals if the denial includes appeal instructions — you often have 30 days from the date on the denial letter to file a protest.
  • Consider filing a new offer only if you can show materially changed circumstances or new evidence that wasn’t included previously. The FinHelp guide on reopening a previously denied Offer in Compromise explains steps and timing.

Avoid these common mistakes

  • Sending incomplete updates. Partial updates slow processing and can be construed as not materially different.
  • Waiting too long. A rapid response after a change shows good faith and improves the chance the IRS will reconsider.
  • Relying on estimates. Give the IRS verifiable documents rather than rough projections.
  • Ignoring collection notices. If you have an accepted OIC but stop paying without notifying the IRS, you risk default and collection actions.

Real-world examples (anonymized)

  • Job loss: A client’s offer was pending when they lost a job. We submitted updated 3 months of bank statements, their unemployment eligibility letter, and a concise cover letter. The IRS recalculated and reduced the proposed payment. The case closed within three months.
  • Health emergency: Another client developed high medical bills after acceptance and could not meet an installment schedule. By promptly contacting the IRS and providing medical billing statements and a revised Form 433-A (OIC), we obtained a temporary adjustment and, ultimately, an amended offer that matched their changed ability to pay.

When to get professional help

If your situation includes complicated business valuations, recent bankruptcy, divorce asset splits, or appeals, engage a tax attorney, enrolled agent, or CPA experienced with OICs. In my 15+ years advising clients, professional representation improves documentation quality, appeals strategy, and communication with the IRS.

For help preparing the financial statement and paperwork, see FinHelp’s guide on preparing the financial statement for an Offer in Compromise.

Alternatives if modification or reapplication is not viable

If the IRS will not change an accepted or pending offer, consider these alternatives:

  • Request an installment agreement if you can pay over time.
  • Explore other relief options (bankruptcy, currently not collectible status) depending on your full financial picture.

See FinHelp’s article on next steps and alternatives after an Offer in Compromise denial for detailed options.

Documentation checklist (quick)

  • Current Form 433-A (OIC) or 433-B (OIC)
  • Updated Form 656 (if you propose a different amount)
  • Proof of income changes (paystubs, unemployment letter)
  • Proof of new expenses (medical bills, divorce decree, court orders)
  • Bank and retirement statements
  • Cover letter and list of attachments

Final tips and professional disclaimer

  • Notify the IRS quickly, submit clear documentation, and keep thorough copies. In my practice, a single well-organized submission reduces follow-ups and shortens resolution time.
  • Always confirm receipt with the IRS and maintain polite, factual communication.

This article is educational and does not replace personalized tax advice. For case-specific guidance about modifying or reapplying an Offer in Compromise, consult a qualified tax professional.

Authoritative sources

Related FinHelp guides

Professional disclaimer: This information is intended for educational purposes only and does not constitute legal or tax advice. Always consult a qualified tax professional for advice tailored to your situation.