What is the OIC application fee, and when is it waived?

$205, waived for taxpayers who meet the low-income certification guidelines (and for doubt as to liability offers)

$500, waived for businesses that meet the low-income certification guidelines (and for effective tax administration offers)

For a lump-sum cash offer (paid in 5 or fewer installments after acceptance), what must accompany Form 656?

A nonrefundable payment of 20% of the offer amount (unless the low-income waiver applies)

Nothing until acceptance, when the full offer amount is due within 5 months in up to five installments

What is the "reasonable collection potential" (RCP) in a doubt-as-to-collectibility offer?

The value of the taxpayer's home only, ignoring all other assets and any future disposable income

The taxpayer's annual gross income

Which forms are submitted for an individual doubt-as-to-collectibility offer?

Form 656-L and Form 433-A (OIC)

What happens if the IRS does not make a determination on an offer within 24 months of submission?

The taxpayer must refile the offer

After an offer is accepted, what compliance requirement applies?

The taxpayer must timely file and pay all taxes for 5 years (or until the offer is paid, if longer), or the IRS may default the offer

How does a taxpayer appeal the rejection of an offer in compromise?

Request an Appeals review within 30 days of the rejection letter, generally using Form 13711

File a Tax Court petition within 90 days of the rejection letter, generally attaching Form 12153

Which condition makes a taxpayer ineligible to submit an offer in compromise?

Being in an open bankruptcy proceeding

Having an existing installment agreement with the IRS

While an offer in compromise is pending, may the IRS levy?

No; levy is generally prohibited while the offer is pending, for 30 days after rejection, and during a timely appeal

Only for amounts over $10,000; levy is otherwise prohibited while the offer is pending and for 30 days after any rejection

Offer in compromise

An offer in compromise settles a tax debt for less than the full amount based on doubt as to collectibility, doubt as to liability or effective tax administration; it costs $205 plus 20% down for a lump-sum offer (waived for low-income filers), and the IRS generally expects at least your reasonable collection potential.

Updated 2026-09-23 · 4 sources · By the EnrolledAgentKit team

Exam part

Part 3

Representation, Practices and Procedures

IRS domain

Specific Areas of Representation

20 of 85 scored Qs

Tax year tested

2025

2026-27 SEE

Practice questions

10 free below

The rules the exam tests

Figures for tax year 2025, the year the 2026-27 SEE tests. Verify against the cited primary source.
Rule	What it says (2025)	Source
Grounds	Doubt as to collectibility, doubt as to liability (Form 656-L), effective tax administration	IRC 7122
Fee	$205 (waived for low-income certification and for doubt as to liability)	Form 656-B
Lump-sum offer	20% nonrefundable with application; balance in 5 or fewer payments	Form 656-B
Periodic payment offer	First payment with application; keep paying monthly while pending	Form 656-B
RCP	Net realizable equity + future disposable income x 12 (lump) or 24 (periodic)	Form 656-B
Forms	Form 656 + Form 433-A (OIC) / 433-B (OIC)	IRS
Eligibility	All returns filed, estimates current, not in open bankruptcy	Form 656-B
Deemed acceptance	If not rejected within 24 months	IRC 7122(f)
While pending	No levy; CSED suspended; 30 days after rejection and during appeal	IRC 6331(k)
After acceptance	5 years of compliance; IRS keeps refunds through acceptance year	Form 656

Worked example

Facts: A taxpayer owes $60,000. Car equity $4,000 (quick-sale value), no other equity; monthly disposable income after allowable expenses $150.

RCP (lump-sum): $4,000 + $150 x 12 = $5,800. An offer of $5,800 or more is a realistic lump-sum offer, with 20% ($1,160) plus the $205 fee sent with Form 656. For a periodic payment offer the income multiple would be 24: $4,000 + $3,600 = $7,600.

Exam traps

Must be in filing compliance to apply.
The 20% payment is nonrefundable.
Deemed acceptance at 24 months.
Accepted offers require 5 years of compliance.