What Happens When Your Offer in Compromise Is Rejected?
When your offer in compromise is rejected, the IRS will send you a letter explaining why.
The most common reasons include missing paperwork, offering too little based on your financials, or not being current with tax filings.
A rejection is not the end of the road. In fact, you have several clear paths forward that may still bring relief. You can appeal within 30 days, revise your offer, or explore other relief options.
Step 1: Understand the IRS’s Reason for Rejection
Every rejection letter includes an Income/Expense Table (IET) and an Asset/Equity Table (AET).
These show how the IRS calculated your “reasonable collection potential” — essentially, what they believe you can afford to pay.
If the IRS numbers don’t match your reality, you have grounds to act.
Step 2: File an Appeal Within 30 Days
You have the right to appeal a rejected OIC by submitting Form 13711, Request for Appeal of Offer in Compromise, or by sending a detailed protest letter.
The deadline is 30 days from the rejection letter date. Missing that window usually ends your appeal rights.
Your appeal must include:
- Your identifying information and the tax years at issue.
- Each part of the rejection you disagree with.
- Facts, evidence, and (if possible) supporting law or authority.
- Your signature under penalties of perjury.
Step 3: Revise and Re-Submit
Sometimes the best move is to strengthen your financial package.
If your income has dropped, expenses have increased, or the IRS miscalculated your equity, you may want to submit a new OIC with updated information.
Comparing your records with the IRS’s IET and AET tables can reveal the gaps that caused the denial.
Step 4: Consider Alternatives
If an OIC isn’t feasible at this time, other IRS-approved relief options can still help:
- Installment Agreement — A structured monthly payment plan.
- Currently Not Collectible (CNC) — Temporary pause on IRS collection if you can prove financial hardship.
Moving Between Topics
This post follows our discussion on penalty abatement, where we explained how taxpayers can request the IRS to remove added fees. If penalties are driving up your balance, review that guide first — reducing penalties can make an Offer in Compromise more realistic.
Looking ahead, the next step is knowing how much you should offer in an OIC to improve your chances of acceptance. We’ll cover the calculation process in detail in the next blog; How Much Should I Offer in an Offer in Compromise.
Final Thoughts
A rejected Offer in Compromise isn’t the end. You can appeal, reapply, or pursue another resolution strategy. The key is acting quickly within the 30-day deadline and having the right evidence in hand.
Schedule a free consultation today. We’ll review your rejection letter, compare your financials to the IRS’s IET and AET, and help you decide whether to appeal, resubmit, or pursue another tax relief option.