Immediate steps after an OIC denial
Receiving a denial letter from the IRS is stressful, but prompt, organized action improves outcomes. The IRS denial letter (the “Notice of Determination” or similar correspondence) will explain why the offer was rejected and list deadlines for appeal or resubmission. Read the notice carefully, note any deadlines (commonly 30 days for appeals), and gather the documentation the letter references.
Key immediate actions:
- Save the denial letter and read the reasons the IRS gives.
- Note appeal deadlines and any required forms (see “Appeal the decision” below).
- Collect the financial documents you submitted originally and any new evidence that corrects or clarifies errors.
- Stop automatic payments or update payment plans only after you confirm consequences with a tax professional or the IRS.
(For official guidance on offers in compromise, see the IRS OIC page: https://www.irs.gov/individuals/offer-in-compromise.)
Appeal the decision — how the appeals process works
You generally have the right to appeal an OIC denial. Appeals are handled by the IRS Office of Appeals, an independent organization within the IRS whose job is to resolve disputes without litigation whenever possible. To initiate an administrative appeal of an OIC denial, you typically submit the IRS form used for appeals specific to OICs (see Form 13711: Request for Appeal of Offer in Compromise) and a written statement explaining why the denial was incorrect.
Important points:
- Timing: Appeals are time‑sensitive. The denial notice will state the appeal deadline (commonly 30 days from the date of the denial letter). Missing this window can forfeit an administrative appeal right.
- Focus your appeal on the factual and legal errors the examiner made — incorrect asset valuations, overlooked allowable expenses, or omitted documentation.
- Attach clear, corroborating documents (bank statements, paystubs, medical bills, proof of dependent claims, etc.).
- An experienced tax advocate or attorney can draft the appeal to emphasize the strongest bases (doubt as to collectibility, doubt as to liability, or effective tax administration).
See IRS instructions for appeals and Form 13711 at: https://www.irs.gov/forms-pubs/about-form-13711 and review Form 656 guidance at: https://www.irs.gov/forms-pubs/about-form-656.
Submit a new or amended Offer in Compromise
If the denial was based on errors or missing information, submitting a corrected offer can be effective. Before reapplying, perform a careful review of your financial package and fix the problem areas identified by the IRS.
Steps to prepare a stronger second offer:
- Recalculate your reasonable collection potential (RCP). Ensure asset values and income figures are accurate and supported by documentation.
- Update living expense entries with actual receipts and proof — the IRS has standards (and limited categories) for allowable living expenses.
- Provide new evidence of hardship (medical records, unemployment notices, recent large expenses) when relevant.
- Consider altering the type of offer: lump-sum versus periodic payments. A realistic payment structure that matches your cash flow increases credibility.
For practical tips on reapplying and what to change, see our guide: Reapplying After a Denied Offer in Compromise: What to Change and When (https://finhelp.io/glossary/reapplying-after-a-denied-offer-in-compromise-what-to-change-and-when/).
Alternatives when a new OIC or appeal isn’t the best option
An OIC is just one tool. If the IRS concludes you can repay all or most of the liability, or if an appeal/new offer isn’t likely to succeed, consider these commonly used alternatives:
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Installment agreement: The IRS may accept a monthly payment plan. There are short-term (up to 120 days) and long-term installment agreements. Ability-to-pay calculations and collection processes differ from an OIC.
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Currently Not Collectible (CNC) status: If your income is too low to meet basic living expenses after required payments, request CNC status. While CNC halts most collection activity temporarily, penalties and interest continue to accrue and the IRS can review your status periodically.
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Partial-payment installment agreement (PPIA): This is an installment plan that takes into account that the IRS may not collect the full balance; payments are reviewed and may result in collection closure after a fixed period if remaining balance is uncollectible.
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Offer based on doubt as to liability or effective tax administration: If you have reasonable grounds to dispute the tax amount itself (doubt as to liability) or if collection would cause economic hardship and collection is not in the best interest of tax administration, these are alternative legal bases for an OIC. If your denial was based on doubt as to collectibility alone, review whether another ground fits.
For a deeper look at alternatives, see: When an Offer in Compromise Is Not the Right Choice: Alternatives to Consider (https://finhelp.io/glossary/when-an-offer-in-compromise-is-not-the-right-choice-alternatives-to-consider/).
Documentation checklist — what to assemble before you appeal or reapply
- Most recent federal tax returns and any amended returns
- Pay stubs and proof of income for all household members
- Bank statements (3–6 months)
- Proof of extraordinary expenses: medical bills, childcare, education costs
- Mortgage/rent statements and utilities
- Asset documentation: titles, appraisals, vehicle loans, retirement account balances
- Court-ordered payments: child support or alimony
- Any correspondence from the IRS related to the account
A complete package minimizes back-and-forth with examiners and strengthens both appeals and resubmitted offers.
Timing and likely outcomes
- Appeal window: typically 30 days from the date of the denial letter — confirm the exact deadline on your notice.
- Reapplying: there is no automatic waiting period to submit a corrected offer unless the IRS imposes a bar; however, wait until you have new or corrected evidence that addresses the denial reasons.
- Installment agreements or CNC requests can be initiated even while an appeal is pending in some cases; consult a professional before filing concurrent actions to understand potential consequences.
Common mistakes to avoid
- Waiting too long: Missing appeal deadlines often eliminates administrative options.
- Resubmitting the same unsupported figures: A second offer should correct the reasons for denial.
- Overlooking potential allowable expenses: Properly documented living-expense claims can materially affect RCP calculations.
- Not getting professional help when cases involve complex assets, business valuations, or legal questions.
Practical tips from practice
In my work helping clients, the most successful appeals and re‑offers share three traits: (1) crisp, well‑organized documentation; (2) realistic valuations and monthly budgets tied to verifiable statements; and (3) prompt, clear responses to IRS requests. When a family’s cash flow is tight, pursuing CNC status or a negotiated installment plan while preparing an appeal can preserve options and reduce immediate pressure.
Frequently asked questions (short answers)
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Can I get a refund of payments made with my OIC if it’s denied?
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It depends on the payment method and how the IRS applied the funds. Review your denial letter and consult the IRS or a tax pro for your specific situation.
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How often can I submit a new OIC?
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There is no strict cap on the number of offers you can submit, but each should materially address prior deficiencies. Repeated, unsupported offers are unlikely to succeed.
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Will a denial go on my credit report?
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OIC denials per se do not appear on credit reports, but tax liens (where applicable) or enforced collection actions could affect credit. Check current lien rules and consult with a tax attorney if liens are in play.
Where to get help and authoritative resources
- IRS — Offer in Compromise: https://www.irs.gov/individuals/offer-in-compromise
- IRS — About Form 656 (Offer in Compromise): https://www.irs.gov/forms-pubs/about-form-656
- IRS — About Form 13711 (Request for Appeal of Offer in Compromise): https://www.irs.gov/forms-pubs/about-form-13711
Additional FinHelp guides that may help you prepare or appeal:
- Reapplying After a Denied Offer in Compromise: What to Change and When — https://finhelp.io/glossary/reapplying-after-a-denied-offer-in-compromise-what-to-change-and-when/
- How Offer in Compromise Appeals Work After a Denial — https://finhelp.io/glossary/how-offer-in-compromise-appeals-work-after-a-denial/
- When an Offer in Compromise Is Not the Right Choice: Alternatives to Consider — https://finhelp.io/glossary/when-an-offer-in-compromise-is-not-the-right-choice-alternatives-to-consider/
Final notes and disclaimer
This page provides general information based on IRS rules and practical experience helping taxpayers navigate OIC denials. It is educational only and does not substitute for personalized tax advice. For guidance tailored to your case, consult a qualified tax professional (CPA, enrolled agent, or tax attorney) or contact the Taxpayer Advocate Service if you face financial hardship.
(Prepared using IRS guidance current as of 2025 and FinHelp practitioner experience.)
