Offer in Compromise: Qualification and Resolution

Categories: IRS CE, IRS Resolution
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About Course

When a taxpayer owes more than they can realistically pay, the Offer in Compromise program under IRC §7122 provides a structured path to resolve the liability for less than the full amount owed. This course provides a practitioner-focused examination of all three OIC grounds — Doubt as to Collectibility, Doubt as to Liability, and Effective Tax Administration — equipping tax professionals to evaluate eligibility, calculate the Reasonable Collection Potential, prepare the complete submission package, and advise clients on the obligations that follow acceptance.

Across four structured modules, participants apply the IRS Collection Financial Standards to determine allowable expenses, calculate net realizable value using the IRS quick-sale discount, analyze DATL and ETA documentation requirements, complete Form 656 and Form 656-L, and navigate the OIC process from initial submission through the five-year compliance period. 

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What Will You Learn?

  • Evaluate a taxpayer's eligibility for an OIC under IRC §7122 and identify which of the three grounds — DATC, DATL, or ETA — applies to the client's situation
  • Calculate the Reasonable Collection Potential using the IRS Collection Financial Standards, including net realizable value of assets with the 20% quick-sale discount and monthly disposable income multipliers
  • Distinguish Doubt as to Liability from Doubt as to Collectibility and advise clients on when Form 656-L is the appropriate submission form
  • Explain both prongs of Effective Tax Administration — economic hardship and public policy — and identify the factual circumstances under which each prong may apply
  • Complete a standard Form 656 submission package, select the lump sum or periodic payment structure, calculate the applicable minimum offer amount, and apply the low-income certification waiver when eligible
  • Advise clients on post-acceptance compliance obligations during the five-year compliance period and explain the consequences of default and the conditions for federal tax lien release

Course Content

Module 1 – OIC Overview, Eligibility, and the Three Grounds
This module introduces the offer in compromise program under IRC §7122, explains the three grounds for compromise, and identifies the eligibility requirements and disqualifying circumstances practitioners must assess before submitting an OIC.

  • OIC Overview, Eligibility, and the Three Grounds

Module 2 – Doubt as to Collectibility and RCP Calculation
This module covers the IRS Reasonable Collection Potential framework: how to apply the Collection Financial Standards to calculate allowable expenses, determine the net realizable value of assets using the 20% quick-sale discount, and compute the minimum acceptable offer under both lump sum and periodic payment structures.

Module 3 – Doubt as to Liability and Effective Tax Administration
This module distinguishes Doubt as to Liability — submitted on Form 656-L — from the standard DATC offer, and examines both prongs of the Effective Tax Administration ground: economic hardship and public policy. Practitioners learn the documentation and narrative requirements for each ground and how to select the correct OIC basis for a given client situation.

Module 4 – Form 656, the Submission Package, and Post-Acceptance Compliance
This module covers the complete OIC submission package for Form 656: selecting the lump sum or periodic payment structure, low-income certification, the IRS processability review and 24-month investigation window under IRC §7122(f), and the five-year post-acceptance compliance period including default consequences and federal tax lien release under IRC §6325(a).

Final Assessment – Offer in Compromise: Qualification and Resolution
You have completed a comprehensive review of the offer in compromise program under IRC §7122, covering all three grounds for compromise, RCP calculation methodology, DATL and ETA documentation requirements, the Form 656 submission process, and post-acceptance compliance obligations. You are now prepared to demonstrate your understanding of the key concepts. The following final examination assesses your knowledge of the material covered in all four modules. A passing score of 70% is required to successfully complete the course.

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