When your Offer in Compromise (OIC) is accepted by the IRS, it can feel like a huge weight has been lifted. But acceptance is not the end of the process—there are important steps and ongoing obligations you need to understand to ensure you keep the benefits of your agreement and avoid future problems. Here’s what you can expect after your OIC is accepted, based on current IRS rules and procedures.
1. Written Acceptance and Terms
Once the IRS accepts your OIC, you’ll receive a written notification of acceptance. This letter will outline the terms of your agreement, including the amount you must pay, the payment schedule (if applicable), and any collateral agreements you may have entered into. The acceptance is not official until you receive this written notice.
2. Payment of the Offer Amount
You must pay the agreed-upon offer amount according to the terms in your acceptance letter. This could be a lump sum or periodic payments over a set period (not to exceed 24 months for periodic payment offers). If you fail to make these payments on time, your OIC may default, and the IRS can reinstate your full original tax liability, minus any payments already made.
3. Five-Year Compliance Requirement
A critical condition of every OIC is that you must remain fully compliant with all tax filing and payment obligations for five years after acceptance (including any extensions). This means:
- Filing all required tax returns on time.
- Paying all taxes you owe in full and on time.
- Making all required estimated tax payments and federal tax deposits if you are self-employed or a business owner.
If you fail to comply with these requirements, your OIC can be defaulted, and the IRS may pursue collection of the original tax debt, plus penalties and interest.
4. IRS Retains Your Tax Refunds
As part of the OIC agreement, the IRS will keep any tax refunds (including interest) for tax periods up to and including the year your offer is accepted. These refunds are applied to your overall tax debt and are not considered payments toward your OIC amount. You cannot designate these refunds to be applied to future estimated taxes.
5. Release of Federal Tax Liens
If a Notice of Federal Tax Lien was filed against you, the IRS will release the lien once you have fully paid the offer amount and met all terms of the agreement. The release is typically processed promptly after your final payment is received, but the timing can vary depending on your payment method (e.g., cashier’s check, personal check, debit/credit card).
6. No Additional Tax Periods Can Be Added
Once your OIC is accepted, you cannot add new tax debts to the agreement. Any new tax liabilities that arise after acceptance must be paid in full and cannot be included in the existing OIC. If you incur new tax debt and do not pay it, your OIC may default.
7. What If You Can’t Make a Payment?
If you are unable to make a scheduled payment, you may request a one-time extension within a 24-month period. However, all subsequent payments must be made on time. If you continue to have trouble, contact the IRS immediately to discuss your options.
8. What Happens If You Default?
If you fail to meet any of the terms of your OIC—including payment, filing, or compliance requirements—the IRS may:
- Reinstate the full original tax debt, minus any payments made.
- Reinstate all penalties and interest.
- Resume collection actions, including levies and liens.
9. Keeping Records
Keep copies of your acceptance letter, payment records, and all correspondence with the IRS. If you ever need to prove compliance or resolve a dispute, having thorough documentation will be invaluable.
10. Moving Forward
An accepted OIC gives you a fresh start, but it comes with ongoing responsibilities. Stay organized, keep up with your tax obligations, and reach out to the IRS or a tax professional if you have questions or run into trouble.
In summary: After your OIC is accepted, you must pay the agreed amount, stay compliant for five years, and understand that the IRS will keep certain refunds and release liens only after full payment. Failure to meet any term can result in the loss of your compromise and reinstatement of your full tax debt. Stay vigilant, and you’ll enjoy the benefits of your hard-won agreement.
