How Long Does It Take To Settle With The IRS?

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If an offer in compromise is accepted by the Internal Revenue Service, it takes approximately 6 to 8 months to settle a tax debt. If the offer is rejected, then accepted on appeal, it takes from 8-12 months before the debt is settled.

The IRS Offer in Compromise Program

The Offer in Compromise Program is a way to settle the federal tax debt, but the offer must be accepted first by the IRS. Once accepted, a taxpayer can settle his/her tax debt for less than the amount owed. When a taxpayer owes unpaid taxes to the IRS, he/she has up to 10 years to settle the debt. Although penalties and interest start accruing the day after taxes are due, collection may be temporarily suspended during a request for an offer in compromise. If the offer is denied, collection efforts will be suspended for another 30 days during an appeal.

From start to finish, it may take up to 12 months or longer to settle a tax debt through an offer in compromise program, because the process must be completed in steps:

Step 1 – Deeming the Offer Processable

Step 1 takes approximately 3 to 6 weeks. During the first step, a taxpayer must submit an Income Certification for Offer in Compromise Application Fee and Payment, along with an installment payment or 20 percent lump sum offer. The taxpayer must also prove that he/she is not in an open bankruptcy proceeding.

Step 2 – Assignment of an IRS Examiner

Step 2 takes approximately 4 to 8 weeks. After the offer is deemed processable, an IRS examiner will be assigned to the taxpayer. An official letter of introduction stating the name of the examiner and contact information will be mailed to the taxpayer showing that the offer was received.

Step 3 – Examination

Step 3 can take from 1 to 8 months, depending on the complexity of the examination. During this process, the examiner acts as an auditor. He/she will go through all submitted documents and determine the taxpayer’s total worth, including income and assets.

Step 4 – Acceptance or Denial of Offer

Step 4 can take from 6 to 8 months if the offer is accepted. During this step, the examiner will accept or deny the taxpayer’s offer. If the offer is rejected, the examiner may present an opportunity for the taxpayer to increase his/her offer or file an appeal.