Understanding the Offer in Compromise Pre-Qualifier: Am I Eligible?

Quick overview

The Offer in Compromise (OIC) Pre-Qualifier is a free online screener published by the IRS that gives a fast, plain-language estimate of whether your financial situation might meet IRS standards for an Offer in Compromise. The Pre-Qualifier evaluates your reported income, monthly living expenses and basic asset values and then tells you if you appear to be a realistic candidate for an OIC. The tool is not an application and does not replace the formal OIC paperwork or a professional review. (IRS: Offer in Compromise Pre-Qualifier: https://www.irs.gov/individuals/offer-in-compromise-pre-qualifier)

In my practice working with taxpayers for more than a decade, I use the Pre-Qualifier early in the intake process. It helps prioritize who should prepare a full OIC package and who should consider alternate options such as an installment agreement or other relief. The results are a starting point — the IRS will perform a much deeper financial analysis if you submit Form 656 and supporting documents. (IRS: Offer in Compromise Overview: https://www.irs.gov/businesses/small-businesses-self-employed/offer-in-compromise-oic)

How the Pre-Qualifier works, step by step

1. Gather basic financial details before you start: monthly income (after payroll deductions), regular monthly living expenses, estimated value of assets (bank balances, vehicles, investment and retirement accounts), and basic debt amounts.
2. Open the IRS OIC Pre-Qualifier on the IRS website and follow the prompts. The tool asks for simple numbers, not tax-return copies.
3. The Pre-Qualifier computes whether your disposable income and assets leave little or no realistic ability to pay the full tax liability. If the tool indicates you may qualify, it offers guidance about next steps; if not, it explains why.

The IRS emphasizes that the Pre-Qualifier is informational only — it does not lock in eligibility and will not submit an offer on your behalf. It is a screening device to save taxpayers time. (IRS Pre-Qualifier page)

What the Pre-Qualifier checks (and what it doesn’t)

• What it evaluates: household income (wages, self-employment income, certain benefits), typical living expenses (housing, utilities, medical, transportation), and the value of non-exempt assets. These inputs feed into the IRS concept of “reasonable collection potential” (RCP), which is the estimated amount the IRS believes it can collect from you.
• What it does not do: perform a full RCP calculation, review detailed tax transcripts, or substitute for the formal OIC application (Form 656) and financial disclosure (Form 433-A or 433-B where required). The IRS will request supporting documents as part of a full submission.

For a deeper explanation of how the IRS values an OIC, see our article: How an Offer in Compromise Is Valued by the IRS.

Interpreting Pre-Qualifier results

• “You may qualify”: This means your inputs suggest limited ability to pay. It is a prompt to assemble a full OIC package. Many applicants who pass the Pre-Qualifier still receive follow-up questions or denials if documentation contradicts the initial answers.
• “You probably don’t qualify”: This suggests the IRS likely expects to recover more than an OIC would provide. Consider other options, such as an installment agreement, currently available tax relief programs, or negotiating placement of liens or abatements. Our guide Choosing Between an Installment Agreement and an Offer in Compromise explains trade-offs.

A Pre-Qualifier “may qualify” recommendation is not a guarantee. I routinely see cases where an initial positive screening leads to a successful OIC only after carefully documenting allowable expenses and negotiating asset valuations.

Common documentation you will need if you move forward

If the Pre-Qualifier indicates you may qualify, prepare the documents commonly requested for a full OIC submission:

• Recent pay stubs or income statements
• Bank statements (3–6 months)
• Proof of regular monthly expenses (rent/mortgage, utilities, medical bills)
• Statements for vehicles, retirement and investment accounts
• Copies of recently filed tax returns and IRS notices

Our practical checklist: Preparing an Offer in Compromise: Documentation Checklist provides a detailed list and examples to speed preparation.

Fees, payments and timing (what to expect)

The IRS provides guidance about application requirements on its OIC pages. The Pre-Qualifier itself is free. If you submit a formal OIC, the IRS typically requires an application fee and an initial payment tied to the offer type; low-income taxpayers may qualify for a fee waiver. Exact payment rules depend on whether you submit a lump-sum cash offer or a periodic payment offer. The formal details are on the IRS OIC resource pages. (IRS: Offer in Compromise)

Processing times for a full OIC vary by case complexity and IRS workload; expect several months. In my experience, straightforward cases with complete documentation are resolved faster; incomplete packages produce delays and potential denials.

Real-world examples (how the Pre-Qualifier helped)

• Example 1: A self-employed taxpayer with irregular profits used the Pre-Qualifier and saw they might qualify. After collecting bank statements and documenting allowable business expenses, the taxpayer submitted a complete OIC and the IRS accepted a reduced balance.
• Example 2: A retired worker with high medical expenses ran the Pre-Qualifier and the tool indicated low likelihood. Rather than applying, they used the information to negotiate payment options and conserve funds for medical care.

These examples show the tool’s value as a triage mechanism to choose the best next step.

When the Pre-Qualifier can be misleading

• Entering inaccurate income or expense numbers can produce false positives/negatives. Always use actual statements when possible.
• Omitting assets (for example, retirement accounts or recent cash windfalls) can understate collection potential.
• The Pre-Qualifier uses simplified rules and does not account for complex issues such as doubt as to liability or bankruptcy considerations.

Avoid these pitfalls by documenting numbers before you start and by using the Pre-Qualifier only as a screening tool.

Alternatives if you don’t qualify

If the Pre-Qualifier indicates you likely do not qualify, consider:

• An IRS installment agreement to pay over time (often better for taxpayers with steady income)
• Temporarily requesting currently not collectible (CNC) status if collection would cause immediate hardship
• Evaluating bankruptcy options with a qualified attorney when tax debts are dischargeable

See our article on options after denial and alternatives: When an Offer in Compromise Is Not the Right Choice: Alternatives to Consider and Options After a Denied Offer in Compromise.

Practical strategies to improve your chances

1. Be accurate and conservative with income estimates — avoid optimistic assumptions.
2. Document every monthly expense you claim and be ready to prove medical or extraordinary costs.
3. Review possible asset exemptions and use realistic valuations; IRS agents will scrutinize luxury valuations.
4. Consider professional help early: a CPA, enrolled agent, or tax attorney can often spot deductible expenses or valuation approaches you might miss. For a walkthrough of the IRS valuation approach see: How Offer in Compromise Eligibility Is Determined: A Practical Walkthrough.

In my practice, carefully documenting recurring medical costs or temporarily reduced income has been the difference between a denial and an accepted OIC.

Final steps and checklist if the Pre-Qualifier is positive

• Print or save the Pre-Qualifier result for your records.
• Assemble the documentation checklist above.
• Decide whether to prepare and submit Form 656 (and supporting Form 433-A/B) yourself or with a professional.
• Confirm whether you qualify for an application fee waiver before sending money.
• Expect follow-up from the IRS and respond promptly to any requests.

Sources and authority

• IRS — Offer in Compromise (OIC) main page: https://www.irs.gov/businesses/small-businesses-self-employed/offer-in-compromise-oic
• IRS — Offer in Compromise Pre-Qualifier tool: https://www.irs.gov/individuals/offer-in-compromise-pre-qualifier

This article draws on IRS guidance and my experience advising clients through OIC screening and submissions. It is intended as educational information, not legal or tax advice. For help tailored to your circumstances, consult a qualified tax professional or CPA.

Professional disclaimer: This content is educational and does not constitute legal, tax or financial advice. Rules, forms and IRS processes change; confirm current requirements on the IRS website or with a licensed tax professional before taking action.