An Offer in Compromise lets you settle your IRS debt for less than you owe. The IRS calculates your Reasonable Collection Potential — what they think they can actually collect from you — and will accept offers at or above that number.
The IRS accepts about 30-40% of OIC applications. The acceptance rate for professionally prepared applications is higher. The key factors: your income, your expenses (using IRS allowable standards), your asset equity, and how much time is left on the collection statute.
The Reality Check
If you earn $80,000 a year and owe $40,000, an OIC probably won't work. The IRS can collect the full amount through a payment plan. But if you earn $40,000 and owe $200,000, the math often works in your favor.
Beware of companies that promise "pennies on the dollar" without analyzing your specific numbers. That's a red flag.