Offer In Compromise In Brighton, MI
Austin & Larson – Michigan/IRS Tax Settlement Services
Fresh Start – Tax Debt Help – Tax Liability Negotiation
An Offer in Compromise settles a tax debt for less than the full balance. The IRS runs one program. The Michigan Department of Treasury runs a separate one with its own forms, its own math, and its own deadlines. Most Michigan taxpayers who owe on both sides need two applications, not one. Austin & Larson Tax Resolution files both from our office at 812 W. Grand River Ave. in Brighton. Call (866) 668-2953 for a free review of whether you actually qualify
The real odds on an IRS Offer in Compromise
In fiscal year 2025 taxpayers submitted 38,797 offers in compromise and the IRS accepted 5,464 of them. That is roughly one acceptance for every seven offers submitted that year.
The year before, 33,591 offers went in and 7,199 came back accepted. So submissions climbed about 16 percent while acceptances fell about 24 percent. The share accepted dropped from roughly 21 percent to roughly 14 percent in a single year. Both figures come from the IRS Data Book, Table 4-1.
Two caveats we would rather you hear from us than find out later. Offers submitted in one fiscal year are often decided in the next, so the ratio is not a true cohort rate. And an offer that gets returned for a missing signature counts the same as one the IRS reviewed and turned down.
Read past both caveats and the direction is still the direction. More people are applying. Fewer are getting through. A page that quotes you a 30 or 40 percent acceptance rate is quoting a fiscal year that ended a long time ago.
This is why we screen before we file. If your Reasonable Collection Potential comes back above what you owe, an Offer in Compromise is not your answer, and we will say so on the first call instead of collecting a fee to find out. If you want the longer version, we wrote up why most people do not qualify for an Offer in Compromise.
What the IRS will actually accept: the RCP math
The IRS accepts an offer when it equals or exceeds your Reasonable Collection Potential, which is what the agency believes it can collect from you before the collection statute expires. It is arithmetic, not negotiation, and it has two parts.
Net realizable equity in assets. Real property, vehicles, bank balances, retirement accounts, cash value in life insurance. The IRS values assets at Quick Sale Value, normally 80 percent of fair market value, then subtracts what you still owe against them.
Future monthly income. Your average gross monthly income, minus allowable living expenses under the IRS Collection Financial Standards, multiplied by 12 for a lump sum offer or by 24 for a periodic payment offer.
Add the two together. That total is the number your offer has to reach, and the size of your tax debt has almost nothing to do with it. Two people who owe identical balances routinely get completely different answers.
Take a Livingston County couple with four years of unpaid federal income tax. They rent, so there is no home equity in the calculation. Their two vehicles carry some equity, the bank balance is small, and after allowable expenses there is a thin monthly surplus. Multiply that surplus by twelve, add the vehicle equity and the bank balance, and the total lands at a fraction of what they owe. That fraction is the offer, and it is a strong one.
Now give the same couple a paid-down mortgage with real equity in the house. The equity by itself can outweigh everything else in the calculation. Their total climbs past the point where an offer saves them anything, and an installment agreement becomes the better filing. Their income never changed. One asset did.
That is the whole game, and it happens before a single form gets signed.
The IRS publishes a Pre-Qualifier tool. It is a useful sanity check and nothing more. It does not model dissipated assets, it does not handle the shared-household income questions that come up constantly, and a green light from it is not an acceptance.
What the application requires
A standard offer goes in with two payments attached. First, a non-refundable application fee set by the IRS. Second, an initial payment on the offer itself.
The initial payment depends on which structure you choose. A lump sum offer means 20 percent of the amount you are offering goes in with the application, and the balance is paid in five or fewer payments within five months of acceptance. A periodic payment offer means monthly installments running 6 to 24 months, with the first one due at submission and the rest continuing the entire time the IRS reviews your file.
Neither the fee nor the payments come back if the answer is no. The fee is gone. The payments are applied to your outstanding balance rather than refunded. The IRS sets the current fee amount and prints it on Form 656-B; we confirm it before anything is mailed, because it has changed before and it will change again.
Low Income Certification removes all of it. No application fee, no initial payment, and no monthly payments while the offer is under review. Qualification runs on household income measured against 250 percent of the federal poverty guidelines, scaled by household size, so the threshold for a family of four sits well above the threshold for someone filing alone. The current figures are published in Form 656-B (Rev. 4-2026). Businesses cannot use Low Income Certification and pay in full regardless.
The federal forms, and which ones you need
For an offer based on doubt as to collectibility or effective tax administration, everything sits in Form 656-B, the Offer in Compromise Booklet:
- Form 656 is the offer itself. It names you, the tax periods, the amount, and the payment terms.
- Form 433-A (OIC) is the Collection Information Statement for wage earners and self-employed individuals.
- Form 433-B (OIC) is the Collection Information Statement for businesses.
For an offer based on doubt as to liability, meaning you do not believe you owe the tax at all, you file Form 656-L instead. Different form, different standard, no application fee. People file the wrong one constantly. Here is the full documentation an Offer in Compromise requires.
A business offer is a separate offer. A corporation, partnership, or LLC taxed as a corporation lists its periods in Section 2 of its own Form 656, pays its own application fee, and sends its own initial payment. Only a sole proprietor folds business tax into an individual offer under Section 1.
Michigan runs a second, separate program
The Michigan Department of Treasury has its own Offer in Compromise program. Settling with the IRS does nothing to your Michigan balance, and the reverse is also true. If you owe both, you file both.
Michigan accepts an offer on three grounds: doubt as to collectability, doubt as to liability, or an already-accepted federal Offer in Compromise. That third ground is the useful one. Get the IRS to accept, and you have a documented basis to bring to Lansing.
The two programs differ in almost every mechanical detail. Michigan charges no application fee, where the IRS does. Michigan asks for an initial payment calculated as the greater of a fixed minimum or twenty percent of your offer, where the IRS asks for twenty percent flat on a lump sum. The IRS works from Forms 656 and 433; Michigan works from its own 5181 series. The IRS has a hard statutory deadline; Michigan publishes none. And they go to different places, with Michigan offers mailed to the Department of Treasury, Offer in Compromise, P.O. Box 30190, Lansing, MI 48909. Details on both sides come from IRS Form 656-B (Rev. 4-2026) and the Michigan Department of Treasury. There is no separate Offer in Compromise phone line at Treasury; Collection Services takes individual calls at 517-636-5265 and business calls at 517-827-3227.
Two Michigan changes that are quietly disqualifying people
Effective April 1, 2025, Treasury retired the single Form 5181. Applications now have to arrive on Form 5181CI (doubt as to collectability, individual), 5181CB (doubt as to collectability, business), 5181L (doubt as to liability), or 5181F (based on an accepted federal offer). Submit the old consolidated 5181 and Treasury will not review it. You get an Explanation of Ineligible Offer in Compromise Submission, and collection keeps running the whole time. Plenty of sites, including this one until this update, were still handing out a 2022 copy of the retired form.
Effective January 1, 2026, only debt assessed before you submit gets reviewed. Anything Treasury assesses after it acknowledges your offer sits outside the deal, and failing to pay that new assessment in full can make the whole offer ineligible. If you have unfiled Michigan returns that are about to generate an assessment, the sequencing matters more than it used to.
Before Treasury will even look at your file: every return filed for every outstanding period, appeal rights expired, no open bankruptcy, and the offer cannot be a delay tactic.
How long it takes
There is one hard number in the federal program and it is worth knowing. Form 656 states that your offer is accepted by law unless the IRS notifies you otherwise, in writing, within 24 months of the date it was received.
Twenty-four months is the ceiling, not the expectation. Most files are decided well inside it. What we tell Brighton clients to plan for, and this is an estimate from how these cases typically run rather than a promise:
- Weeks 1 to 3. Pull IRS transcripts, confirm the real balance and each collection statute date, and fix compliance gaps. Unfiled returns get prepared here, because an offer filed out of compliance gets returned.
- Weeks 3 to 6. Build the 433-A (OIC) with documentation. Bank statements, pay stubs, vehicle valuations, mortgage statements.
- Submission. Forms, fee, and initial payment go out together. Collection generally pauses on the periods in the offer while the file is pending.
- Months 2 to 9. An offer examiner is assigned and requests more documents. Deadlines here are short and firm. Miss one and the offer comes back unworked.
- Decision. Acceptance, rejection, or a counter. A rejection carries a 30-day appeal right to the IRS Independent Office of Appeals.
Then Michigan, if there is a state balance, usually after the federal acceptance so you can file on that ground.
After an acceptance, you are on the hook for five years
Acceptance is a conditional deal, and the conditions are where people lose it.
Pay the full offer amount inside the agreed window. Then file every required return on time and stay current on every new tax liability for five years from the acceptance date. Miss either one and the IRS defaults the agreement, reinstates the original debt less what you paid, and adds the interest and penalties that accrued the whole time.
Once you finish the payments, the IRS releases the federal tax liens it filed.
The five-year tail is the part that gets skipped in a sales conversation. If you are self-employed with a history of missing estimated payments, that tail is a real risk and you should size it before you sign, not after.
When an Offer in Compromise is the wrong move
We turn down more Offer in Compromise cases than we file. The usual reasons:
- You have equity. A paid-off house or a funded retirement account puts your Reasonable Collection Potential above the debt. The IRS counts it whether or not you would ever sell.
- Your income covers it. Comfortably above the Collection Financial Standards means the IRS expects an installment agreement, not a discount.
- The collection statute is nearly up. The IRS generally has ten years to collect. Filing an offer suspends that clock while it is pending. If you have 18 months left, an offer can hand the IRS back the time it was about to lose.
- You are not in compliance yet. Unfiled returns, or no current-year withholding or estimated payments. Fix that first or the offer gets returned without review.
- You cannot fund the initial payment. The application fee and twenty percent of your offer are real money, they are not refundable, and none of it comes back if the answer is no.
If any of these describe you, the better conversation is Currently Not Collectible status, an installment agreement, penalty abatement, or simply letting a collection statute run out. Those are less exciting than a settlement. They are also, most of the time, the right answer. Every option we handle is listed under our tax resolution services.
Professional Offer in Compromise Help is Near in Michigan
Contact Austin & Larson Tax Resolution to help streamline the Offer in Compromise process for tax debt for both the IRS and the State of Michigan. We pledge to represent you in tax debt communications with both the IRS and State of Michigan with the highest professionalism, integrity, and competency that you will find among all tax debt relief companies. True Fresh Start Tax Settlement is within your reach.
Contact Us Today
We understand how frustrating tax related issues can be and we are here to help resolve your unpaid taxes once and for all. Our team has extensive experience working with the IRS on our clients' behalf to fully resolve tax liabilities, and we would love the opportunity to do the same for you. Reach out for a free consultation today!
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Brighton, Saginaw, Lansing, and Jackson, MI