The IRS Offer in Compromise (OIC) program has really been made a second chance lifeline to help taxpayers who find themselves in dire financial straits. Over the last few years, however, the connection has become very battered.
The once-trusted mechanism for settling an IRS debt, the OIC program, has become a favorite mark for predatory firms and misleading marketing tactics. What was the result? Fewer approvals, wasted resources, and ripped off taxpayers.
As someone who spent decades working both inside the IRS and in private tax resolution practice, I’ve seen this shift unfold in real time. And it’s time we talk about what’s really going on.
What Is the Offer in Compromise?
At its core, an Offer in Compromise allows taxpayers to settle their IRS debt for less than the full amount owed, but only if paying in full would create severe financial hardship. It’s not a loophole, a giveaway, or a secret backdoor. It’s a structured, rule-based process designed to balance the government’s interest in collecting revenue with a taxpayer’s ability to pay.
When used appropriately, the OIC can be a powerful tool for both the IRS and the individual. But today, that intent is being severely undermined.
A Troubling Trend is Arising as Approval Rates Are Falling
In the last year, the IRS received over 33,000 OIC submissions, but accepted just 7,199 of them. That’s a 21% approval rate, far below the historical average of 30-40%. The downward trend is stark and alarming.
So why the drop?
In short: an explosion of frivolous and unqualified OIC filings, driven largely by deceptive advertising and sales tactics from a growing number of tax resolution companies.
How Tax Resolution Companies Are Misleading the Public
We’ve all seen the ads on TV, online, even on billboards promising to “settle your tax debt for pennies on the dollar.” Some claim access to secret IRS programs. Others imply insider connections. Many offer free consultations that quickly turn into high-pressure sales pitches.
The reality? These firms often submit OICs for clients who have no chance of qualifying, wasting IRS resources and leaving the taxpayer in worse shape than before. I personally receive three to four calls each week from taxpayers who spent thousands of dollars on these services, only to be left with a denied offer, no refund, and no clear next steps.
What's the Most Common Deceptive Marketing Tactic
Here are just a few of the misleading claims that you may come across that trick taxpayers into overpaying for false hope:
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“The IRS Writes Off Millions Every Year!”: Technically true, but most of those write-offs come from the expiration of collection statutes, not successful OICs.
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“Fresh Start Program”: It's a real IRS initiative, but not something new, neither a secret. Also, it does not give you a guarantee of settlement.
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“Settle for Pennies on the Dollar”: A catchy phrase, but often misleading. The majority of taxpayers do not qualify for such favorable terms.
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Claims of Insider Access: There are no secret handshakes. The OIC program operates under publicly available criteria and a free IRS pre-qualifier tool.
The IRS Is Trying to Respond But It’s Not Enough
To its credit, the IRS has issued repeated warnings about these scams, even listing OIC fraud on its annual “Dirty Dozen” list of top tax scams. The IRS has also made improvements to accessibility, including:
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The Offer in Compromise Pre-Qualifier Tool
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An online portal for submission and tracking
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Increased public guidance and alerts
Still, last year the IRS had to review and reject over 26,000 OIC submissions, each one diverting time and staff away from legitimate cases.
Recommendations for What Needs to Change in Policy
If we want to restore faith in the OIC program and protect vulnerable taxpayers, stronger enforcement and smarter safeguards are urgently needed. Here are three recommendations:
1. Implement Penalties for Frivolous Filings
Tax resolution firms that knowingly submit invalid offers should face fines similar to those imposed for filing false returns. Because if there are no consequences, abuse will continue.
2. Require a Justification Cover Sheet
Each OIC based on “doubt as to collectability” should be accompanied by a signed form showing the financial basis for the submission, ideally using IRS pre-qualifier data.
3. Track and Sanction Repeat Offenders
The IRS needs to maintain an internal watchlist of firms with high rejection rates. Such firms should be restricted from submitting further offers on behalf of clients.
A Word of Caution for Taxpayers
If you’re considering an Offer in Compromise, you have to proceed carefully. The stakes are high, and so are the risks of being misled. Here are a few survival tips from the inside:
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Only Work with Licensed Professionals: Ask if they are a CPA, attorney, enrolled agent, or better yet, a former IRS agent. If they dodge the question, walk away.
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Review Your Financials with Your Preparer: The person filing your OIC should fully understand your income, assets, and liabilities, not just send over a questionnaire.
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Insist on a Zoom or Video Call Before Hiring: You need to see and speak to the person handling your case, not a commissioned sales rep.
Final Thoughts from the People Who’ve Been There
My co-author Peter Salinger E.A. (former IRS group supervisor of the offer in compromise program) and I wrote Exposing the Secrets for IRS Settlements because we’ve lived these stories from both sides. Peter and I spent years managing OIC cases inside the IRS and later reviewing them in Appeals. We have seen firsthand how large “box firms” flood the system with repeat filings, knowing most will be rejected.
The victims of this abuse are not just the IRS, they’re the everyday taxpayers who deserve real solutions and honest representation.
The Bottom Line
Last year, just 7,200 Americans were able to settle their tax debts through an Offer in Compromise. For them, it was a clean slate: liens lifted, passports restored, peace of mind regained, and debt finally settled.
But tens of thousands more were sold a dream, and left with nothing but disappointment, and still having their IRS tax debt remaining.
The Offer in Compromise is still a powerful solution, but only when it’s used the right way, for the right reasons, by the right professionals. Let’s protect its integrity, hold bad actors accountable, and give honest taxpayers the chance at real relief.
Learn more at: https://www.sullivan4irsmatters.com/
For more details contact Michael Sullivan from Company name: MD Sullivan Tax Group at mike@irs-matters.com or call 954 328 3501.
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