When to Request an Offer in Compromise Reconsideration: Evidence That Helps

Summary

This article explains when to request an Offer in Compromise (OIC) reconsideration, the types of evidence that matter, how to present that evidence, realistic timing expectations, and practical next steps. The guidance draws on IRS rules and my 15+ years as a CPA helping taxpayers resolve collection issues. This is educational information—not legal or tax advice. Contact a qualified tax professional for personalized guidance.

When is reconsideration appropriate?

Request reconsideration only when you can present new, material information that the IRS did not consider in the original decision. Reconsideration is not simply a second chance to submit the same paperwork; it must add materially different evidence or reflect a significant change in circumstances.

Common scenarios that justify reconsideration:

• A major, documented change in income (e.g., termination, reduced hours, business decline).
• New or newly documented large medical expenses or disability costs not previously submitted.
• Unreported but later-documented loss of assets (e.g., uninsured loss, theft) that reduces collectible equity.
• New third-party documentation that contradicts IRS assumptions (payroll records, bank statements, termination letters).
• Discovery of calculation errors or omissions in the Collection Information Statement (Form 433-A/433-B) used to evaluate the OIC.

If your situation falls into one of these categories, you may have a valid basis for asking the IRS to reconsider. The IRS’ guidance supports reopening cases when new facts materially affect ability to pay (see IRS Offer in Compromise resources).

Sources: IRS Offer in Compromise guidance; IRS forms and instructions (Form 656, Form 433-A/B).

What evidence most strengthens a reconsideration request?

The IRS is focused on your ability to pay and your reasonably collectible equity and income. Evidence should be contemporaneous, verifiable, and clearly tied to diminished ability to pay.

Priority evidence types (with examples and why they matter):

1. Income changes

• Evidence: termination letters, unemployment determinations, recent pay stubs showing reduced earnings, profit-and-loss statements for self-employed taxpayers.
• Why: Proves a drop in your monthly Reasonably Collectible Income (RCI).

1. Medical and care expenses

• Evidence: itemized medical bills, statements from providers, records of insurance denials, receipts for recurring prescriptions or long-term care costs.
• Why: Medical outlays are allowable reasonable living expenses and can reduce RCI when properly documented.

1. Housing and utility obligations

• Evidence: lease termination notices, mortgage modification papers, eviction notices, utility bills showing ongoing obligations.
• Why: The IRS allows certain local-standard housing costs; solid docs show necessary living expenses.

1. Asset losses or changes

• Evidence: insurance claim statements, vehicle salvage records, property sale papers showing less-than-appraised value.
• Why: Changes to equity in assets directly affect the IRS’ collectible-asset calculation.

1. Bank and third-party records

• Evidence: bank statements, cancelled checks, payroll reports, Social Security award letters.
• Why: Independent documentation is far more persuasive than sworn statements alone.

1. Proof of extraordinary, one-time expenses

• Evidence: casualty-loss reports, required business repairs, disaster recovery records.
• Why: These non-recurring costs can justify departure from prior financial projections.

When possible, include a short cover letter summarizing how each document changes the IRS’ earlier conclusions.

How to present and submit your reconsideration

1. Read the denial letter carefully. The IRS typically provides the reason(s) for denial in the Notice of Determination or denial letter. Address each reason directly.

2. Update the Collection Information Statement. Provide an updated Form 433-A (individual) or Form 433-B (business) with current figures and attach the supporting documents listed above.

3. Complete and attach Form 656-B or correspondence if applicable. If the denial referenced specific calculations, show corrected math and cite the new documents.

4. Use a concise cover letter. Lay out the key facts, the new evidence, why it is material, and exactly what relief you are requesting (reconsideration or reopening of the file). Number exhibits and reference them in the letter.

5. Mail to the address in the denial notice. Follow any instructions on where to send supplemental evidence. Keep certified-mail receipts and copies of everything you submit.

6. Consider representation. Experienced representation (CPA, EA, or tax attorney) can clarify complex items, ensure proper form use, and communicate with the examiner or appeals officer.

For procedural details and required forms, see the IRS Offer in Compromise page and Form 656 instructions (IRS.gov).

Timing and expectations

• Typical processing times for OIC reconsiderations vary. Many practitioners see decisions in roughly 6–12 months after submission, but delays occur depending on case complexity and IRS workload. Expect follow-up requests for clarification or additional documents.

• Don’t file a reconsideration if you cannot produce new evidence within a reasonable timeframe. Filing too early with weak updates makes a repeat denial more likely.

• Appeal rights: If the IRS issues a final denial after reconsideration, you generally have appeal options such as filing a Collection Due Process (CDP) appeal (if a lien levy issue), an appeal to the IRS Office of Appeals, or taking the case to U.S. Tax Court in certain situations. See the denial notice for specific appeal deadlines and options.

Real-world examples (practical patterns I’ve seen)

Example A — Medical expenses changed the balance
A client’s initial OIC was denied because their reported income exceeded local standards. Six months later they produced hospital bills and insurance denials that showed a three-month period of unpaid medical expenses and ongoing out-of-pocket treatments. We updated Form 433-A, included the bills and provider statements, and the IRS agreed to reconsider; the offer was later accepted.

Example B — Job loss and bank evidence
Another client was denied because the IRS believed a steady income stream existed. The client supplied a termination letter, recent bank statements showing sharply reduced deposits, and unemployment award letters. The IRS reopened the evaluation and negotiated a materially lower settlement.

These examples highlight two consistent points: (1) timing matters—get current documents as soon as they exist—and (2) third-party records are far more persuasive than self-certified claims.

Checklist before you request reconsideration

• Read the IRS denial and identify the exact reason(s) for rejection.
• Confirm you have new, material evidence that was not in the original file.
• Update Form 433-A or 433-B with current numbers.
• Gather third-party documentation (bank statements, termination letters, medical bills, insurance denial letters).
• Prepare a short, numbered exhibit list and cover letter connecting facts to the IRS’ denial points.
• Keep copies and send by certified mail or follow IRS submission instructions.

If you need a granular document list and common submission pitfalls, see our Offer in Compromise Application Checklist for required documents and common errors.

Internal resources:

• Offer in Compromise Application Checklist: https://finhelp.io/glossary/offer-in-compromise-application-checklist-documents-and-common-pitfalls/
• How To Reapply or Modify an Offer in Compromise After Financial Changes: https://finhelp.io/glossary/how-to-reapply-or-modify-an-offer-in-compromise-after-financial-changes/
• Next Steps After an Offer in Compromise Denial: Appeals and Alternatives: https://finhelp.io/glossary/next-steps-after-an-offer-in-compromise-denial-appeals-and-alternatives/

Common mistakes to avoid

• Re-submitting the same package without meaningful change.
• Failing to tie each new document to the reason for denial.
• Omitting updated Forms 433-A/433-B or failing to sign required forms.
• Relying on approximate numbers—use exact, verifiable figures.
• Waiting too long to send evidence after the change—submit promptly while facts are fresh.

Alternatives if reconsideration is unlikely to succeed

If you cannot produce new, material facts, consider other options: negotiate an installment agreement (including partial-payment plans), seek penalty abatement for qualifying reasonable-cause events, or evaluate insolvency and bankruptcy implications with counsel. Our guides on installment agreements and alternatives to an OIC explain pros and cons.

Closing practical tips

• Be methodical: a well-organized packet that directly answers the denial reasons is the most effective persuasion tool.
• Use third-party documents whenever possible.
• Keep communication clear and timeline-oriented—document when events (job loss, medical bills) occurred and when you obtained proof.
• When in doubt, consult a qualified tax professional who handles OIC cases regularly.

Sources and further reading

• IRS — Offer in Compromise (overview and forms): https://www.irs.gov/individuals/offer-in-compromise
• IRS Forms and Publications: Form 656 (Offer in Compromise) instructions, Form 433-A and 433-B (Collection Information Statements)
• National Taxpayer Advocate Reports (context on OIC processing challenges)

Professional disclaimer: This article is educational and does not constitute tax, legal, or financial advice. For case-specific guidance, consult a licensed tax professional, CPA, EA, or tax attorney.