The IRS OIC rejection rate is at a record high. In 2025 alone, out of the 38,797 offers submitted, only 5,464 were approved. This goes to show how careful and strategic you’ve got to be when preparing your request. It’s also a reminder that any tax firm that promises guaranteed OIC approval isn’t trustworthy.
Every year, many taxpayers pay dishonest tax relief firms to file their Offer in Compromise (OIC) applications. They pay thousands just to receive a denial. It’s incredibly disheartening, but if you’re in this situation, there are other steps you can take now to address your tax debt.
Our tax attorneys can help – learn how we negotiate with the IRS for our clients.
Key Takeaways
- An OIC denial doesn’t mean you’re out of options. You can appeal, refile, or pursue a different resolution.
- Filing an OIC pauses the IRS collection clock, and if your case took months before the agency rejected it, the pause may have worked against you.
- One reason OICs fail? The company filed before confirming that you met basic requirements, like compliance with prior tax filings.
- Most fees paid to a tax relief company are non-refundable by default; your contract controls what you’re actually owed.
- A second opinion from a tax professional can clarify whether your case was handled correctly the first time.
Why Many OIC Applications Fail After Paying Big Fees
While the IRS has a low OIC approval rate, rejections sometimes result from negligence by tax relief firms. Unfortunately, many so-called tax relief companies are more focused on getting money from customers than really helping them. They take your money, file an OIC application, and then leave you high and dry once you receive the rejection letter.
Here are some reasons OIC’s are rejected that could’ve been prevented:
- Unfiled tax returns: The tax firm submits your offer without confirming your past tax filings and payments. The IRS doesn’t accept an OIC if a taxpayer has unfiled tax returns or, in some cases, hasn’t made the estimated tax payments.
- Incomplete or incorrect paperwork: Even minor errors, such as incomplete forms, incorrect financial details, or missing signatures, can trigger an automatic rejection. Most tax firms are only after the sign-up fee and don’t bother to check these details.
- Unrealistic offer: The IRS won’t approve your offer if they believe you can afford to pay more. Some tax firms simply use the IRS OIC pre-qualifier as a reference for a taxpayer’s offer without doing a thorough financial analysis to get a reasonable collection potential (RCP).
What an OIC Denial or Return Means
While both a returned and a rejected OIC mean the IRS didn’t approve your offer, it’s for different reasons:
- Returned OIC: If you get a returned OIC, it means the IRS will not process your offer because of a compliance issue, such as missed tax returns or missing documents. To fix this, call the IRS at the number on the notice, correct the issue, and request reconsideration for your offer. You could consider a tax professional to evaluate it to improve your chances of success.
- OIC rejection: The IRS denies your offer when it believes the offer you proposed was too low, and, based on your financial information, it believes it can collect more from you. Your offer could also be rejected if the IRS disagrees with your financial disclosure. In this case, you can appeal or submit a more acceptable offer.
Either way, the IRS typically applies the money you already paid toward your offer to your tax balance rather than refunding it. This money is separate from anything you may have paid the company filing the OIC on your behalf.
Signs Your Case May Have Been Mishandled
If you used a tax relief firm and your offer was rejected, there’s a chance you were mishandled. Here are some signs of negligence from a relief company:
- The firm doesn’t ask about your full filing history before submitting an OIC.
- The person assigned to your case doesn’t tell you that the IRS is unlikely to accept your offer, given your income or assets.
- Months pass with little communication, and you only learn of an issue when you receive the denial letter.
- The company never shares the numbers it used to calculate your offer amount.
While none of these issues alone proves any wrongdoing, together, they’re worth a second look.
Reviewing Your Agreement and Understanding What You Paid For
If you’re looking to resolve this issue and trying to work out a way to get a refund or some type of compensation, the first place you should check is your contract. Confirm the following:
- The total fee charged.
- What services did it included?
- Refund or guarantee language.
- What happens if the IRS returns or rejects your offer?
- What happens if the company never filed your OIC at all?
Many tax relief agreements are written so that the fee covers the attempt, not a particular outcome. The wording is technically legal, but important to understand. If your agreement doesn’t clearly say what you paid for, that’s also useful information to have.
Can You Get a Refund From a Tax Relief Company?
That answer depends on the contract you signed. Some firms offer money-back guarantees tied to specific conditions; most don’t, especially once they’ve performed the work. If you believe the company misrepresented your odds of qualifying, didn’t do the work promised, or missed an obvious disqualifying issue like unfiled returns, you have a few options. You can:
- Request a written refund.
- Dispute the charge with your credit card company.
- File a complaint with your state attorney general or the FTC.
- Talk to an attorney about whether you have a stronger claim.
None of these actions is mutually exclusive, and a written request is the first step, regardless of which other options you choose.
How to Stop Ongoing Payments or Disengage From the Firm
If you’re still paying a relief company in installments – even after you’ve received your OIC denial – and want to stop, send a written letter or email ending the engagement and request your full file, including transcripts, financial disclosures, and any IRS correspondence. Cancel any automatic payment authorization with your bank or card issuer; don’t rely on the company to do it.
Most importantly, keep copies of everything you send.
Steps to Take Immediately After a Failed OIC
If you learn that the IRS denied your OIC, what do you do next? The answer depends on why the initial OIC failed.
If the IRS returned it for a compliance reason, like an unfiled return, you can try filing the missing return and resubmitting the OIC.
If the agency rejected your offer because it felt your offer was less than you can afford to pay, appealing with corrected numbers or a stronger hardship argument might work, especially if the original analysis missed something.
A caveat: If your finances don’t support an OIC, reapplying with the same numbers will likely produce the same result, and a different path may serve you better. The first step? Getting a second opinion.
How a Second Opinion Can Change Your Outcome (for the Better)
A second opinion with a qualified tax professional will give you an accurate read on your financials, filing status, and collection statute date – and help with deciding what to do next. A tax attorney, CPA, or enrolled agent reviewing your transcript will catch a miscalculated reasonable collection potential (RCP), incorrectly tolled collection statute expiration date (CSED), or something else the first filing missed.
Sometimes, the right next step is an appeal. Sometimes, it’s a completely different program. But you won’t know what’s best for your specific situation until someone looks at your numbers.
Common Alternatives to OIC
If an OIC isn’t realistic, you have other options. None of these requires starting from scratch; they build on the financial picture you already have.
An installment agreement spreads what you owe into manageable monthly payments. A partial-pay installment agreement can combine a reduced monthly payment with the collection statute eventually running out on the remaining balance, meaning the IRS forgives that amount. Currently Not Collectible (CNC) status pauses collection if your financial situation is currently dire.
The Risk of Doing Nothing
Ignoring a denial is a bad strategy. Your debt won’t magically disappear, and the IRS can resume collection activity, including liens and levies, once the 30-day appeal window closes. Meanwhile, penalties and interest will continue accruing. If your collection statute was extended by the OIC review itself, doing nothing now gives the IRS more time to collect.
When to Speak with a Tax Attorney
Paying for an OIC that didn’t work out is a solid justification for getting a second opinion before spending more money or time on guesswork. It’s especially worth a call if you can’t tell if the denial was a return or rejection, you suspect unfiled returns or a miscalculated offer caused the problem, or collection notices have resumed, and you don’t know your current statute deadline.
Frequently Asked Questions (FAQs)
Here are common questions on how to handle OIC rejections and paying a firm to apply:
Can I get my money back from the company that filed my OIC?
A refund depends on your contract and what the company delivered. Review your agreement for refund language and submit a written refund request, even if you plan to take other steps, like requesting a chargeback from your credit card company.
Can I reapply for an OIC after the IRS denies my submission?
Often, yes – especially if the rejection letter identified a fixable issue, like an unfiled return. Whether it’s the right move (or not) depends on whether your underlying financial picture supports a new offer. A qualified tax professional acts as your advocate and will present you with the best options and recommendations.
Should I switch to a different company or attorney?
You can work with whomever you choose. A second opinion usually requires a minimal financial investment and can tell you whether your case needs a new filing, an appeal, or a different resolution entirely before you commit more money to resolving your issue.
Get Help Applying for an Offer in Compromise
If you paid for an offer in compromise that didn’t deliver, you deserve to know why and to know what steps are next. Wiggam Law’s Atlanta Offer in Compromise attorneys can review your denial, transcript, and options and tell you honestly where you stand.
