Why the IRS Rejected Your Offer in Compromise – And What to Do Next
An IRS Offer in Compromise (OIC) can be a powerful way to settle your tax debt for less than you owe. But what happens when the IRS says no?
If your OIC was recently denied, you're not alone—and you’re not out of options. In this post, we break down the most common reasons Offers in Compromise get rejected, how to appeal or refile, and how to protect yourself from aggressive collections in the meantime.
Top Reasons the IRS Rejects Offers in Compromise
1. You Can Afford to Pay
The IRS may believe you have the ability to pay through monthly payments or asset liquidation. If your offer didn’t reflect your actual financial situation, it’s likely to be denied.
Related: How the IRS Determines Your Ability to Pay
2. Incomplete or Inaccurate Financials
Missing income sources, understated assets, or vague documentation on your Form 433-A (OIC) can undermine your offer's credibility.
3. Excessive Expenses
The IRS uses Collection Financial Standards to limit what they consider "necessary" living costs. Expenses above these thresholds often get disallowed.
4. Non-Compliance
You must have all required returns filed and be current on estimated payments to qualify. Non-compliance leads to automatic rejection.
5. Offer Too Low
The IRS calculates a minimum offer based on your Reasonable Collection Potential (RCP). If you offered less than this number, it’s likely to be denied.
6. Public Policy or Trust Fund Issues
If your debt involves Trust Fund Recovery Penalties or recent criminal tax violations, your OIC may be rejected outright.
What to Do After a Rejection
Appeal Within 30 Days
Use Form 13711 to request an appeal. This gives you a chance to correct the record or present new facts.
File a New Offer
If your financial situation has changed or your first offer was poorly prepared, you may benefit from a stronger second submission.
Explore Other Options
Depending on your situation, an Installment Agreement, Currently Not Collectible status, or Penalty Abatement might be more effective.
Beware: IRS Collections Resume After Rejection
Once the OIC process ends, the IRS may resume enforcement actions:
Missing an appeal deadline can result in immediate IRS collections—so act fast.
Get Expert Help from a Local CPA
At Boulanger CPA and Consulting PC, we help clients across Orange County challenge IRS OIC rejections, file new offers with stronger documentation, and pivot to resolution strategies that work.
Need help understanding your rejection notice? We’ll review it and build a plan to protect your income and assets.
Call us today at (657) 218-5700 or book online at www.orangecounty.cpa
Frequently Asked Questions
How long do I have to appeal a rejected OIC?
You have 30 days from the date of the IRS rejection letter to submit Form 13711 and request an appeal.
Can I submit a new OIC after being rejected?
Yes. If your financials have changed or your initial offer was flawed, you can submit a new one anytime.
Will the IRS resume collections after a rejection?
Yes, unless you appeal or take other steps to delay collections, enforcement may begin soon after rejection.
What if I made a mistake on my first offer?
You can correct the mistake and refile or appeal, depending on timing. A tax professional can help you decide.
📣 About the Author
Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.
With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.
Marc is a Certified Public Accountant licensed in California and Oklahoma, and is recognized for delivering results—not call center promises. Every case is handled with discretion, strategy, and high-level representation.
📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.
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