If you owe the IRS more than you can pay, rest assured that you are not alone — nor are you stuck. According to IRS Data Book figures, the IRS had nearly 14.9 million delinquent taxpayer accounts in its year-end inventory in fiscal year 2024. This equates to millions of individuals and families with tax debt that they cannot clear in one payment. Some of these people qualify to settle their debt for less than the full amount through a program called an 'offer in compromise'.
This is particularly important for the Armenian community. According to a tabulation of the 2020–2024 American Community Survey five-year estimates, 191,379 residents in Los Angeles County alone identified as having Armenian ancestry, including 65,713 in Glendale (Neilsberg, 2024). Many of these individuals are immigrants and small business owners who must juggle cash flow, family obligations and a tax system written in dense English. When a tax bill becomes unmanageable, the fear of the IRS can be overwhelming.
Here's the thing: The IRS does have a legal process for settling what you owe. It is neither a scam nor a secret. However, it is strict and paperwork-heavy, and IRS Data Book figures for fiscal years 2023 and 2024 show that most applications were not accepted. Understanding how it actually works before paying anyone a fee can save you money and heartache.
Key takeaways
- Under IRC §7122, an offer in compromise allows qualifying taxpayers to settle their federal tax debt for less than the full amount.
- For the 2024 and 2025 tax years, the IRS application fee was $205, though low-income applicants were exempt (IRS).
- Low-income certification for 2024–2025 was set at 250% of the federal poverty level (IRS).
- An offer is submitted on the current revision of Form 656, with documentation of your finances on Form 433-A (OIC).
- Since most offers are not accepted, make sure you get a qualified review before you apply.
Table of Contents
What an Offer in Compromise Actually Is
An offer in compromise is an agreement with the IRS that allows you to settle your tax debt for less than the full amount owed. This legal authority comes from IRC §7122, which enables the government to compromise federal tax liabilities. According to Treasury Regulation §301.7122-1(b), there are three grounds for an offer in compromise: doubt as to liability (you dispute that you owe it), doubt as to collectibility (you cannot pay it in full) and effective tax administration (IRS, 2022).
For a family that simply cannot pay in full, the ground that usually matters is doubt as to collectibility. According to Treasury Regulation §301.7122-1(b)(2), this occurs when your assets and income are insufficient to cover the full liability. However, there is a narrower path: §301.7122-1(b)(3)(i) allows for an effective tax administration compromise when the IRS could collect the full amount, but doing so would cause economic hardship.
So, how does an offer of compromise work in practice? First, you propose an amount. The IRS then compares this to what it believes it could realistically collect from you, which is called your 'reasonable collection potential'. If your offer meets or exceeds that figure, the IRS has a basis to consider it, though acceptance is never guaranteed. If it falls short, the offer may well be rejected unless other grounds, such as effective tax administration or documented special circumstances, support it.
One more point. This is not the only option. In fiscal year 2024, IRS Data Book figures show the IRS established far more installment agreements — monthly payment plans — than it accepted offers. In fiscal year 2024 the IRS established more than 3.4 million new installment agreements, per IRS Data Book figures. For many families, a payment plan is the more practical route.
Who qualifies and how much does it cost to apply?
To be considered, you must generally be up to date with all required tax filings and not be in the process of filing for bankruptcy. Beyond that, your eligibility depends on your finances.
For tax years 2024 and 2025, the IRS application fee was $205, and qualifying low-income individual applicants were exempt from both the fee and the initial payment (IRS). That low-income exemption traces back to the Taxpayer First Act, which added IRC §7122(c)(3) effective July 2, 2019, extending relief to taxpayers whose adjusted gross income does not exceed 250% of the poverty level (IRS, 2019).
For the 2024 and 2025 tax years, the low-income certification standard was 250% of the applicable federal poverty level. This was measured using either your most recent adjusted gross income or your household gross monthly income multiplied by 12 (IRS, 2025). The April 2024 Form 656-B booklet listed the annual limits for the 48 contiguous states, Washington, D.C., and U.S. territories as follows: $36,450 for one person, $75,000 for four people, and $126,400 for eight people, with an additional $12,850 for each subsequent person (IRS, 2024). For tax year 2024, the booklet listed higher figures for Alaska and Hawaii: $93,750 for a four-person household in Alaska and $86,250 in Hawaii (IRS, 2024).
If your family lives in Glendale or Hollywood and your household income is below the limit, this exemption could remove a significant obstacle to applying.
Watch out: the acceptance rate is low. In fiscal year 2023 the IRS received 30,163 offers and accepted 12,711; in fiscal year 2024 it received 33,591 and accepted 7,199 (IRS). That works out to roughly 42% in 2023 and about 21% in 2024, calculated from Data Book Table 27.
How the IRS Determines What You Can Pay
This is where the maths become personal. Your minimum offer is based on two things: the equity in your assets and your future income. Both are calculated using Form 433-A (OIC).
For the 2024 tax year, Form 433-A (OIC) generally valued real estate and vehicles at 80% of their current market value, minus what you still owe on secured loans. This 20% reduction is known as a 'quick-sale value' reduction (IRS, 2024). The same form provided a reduction of $1,000 from your combined bank balances and a reduction of $3,450 for the equity in your car. Another vehicle was permitted on a joint offer (IRS, 2024).
Retirement savings receive special treatment. For the 2024 tax year, Form 433-A (OIC) applied an 80% factor to investment and retirement accounts, noting that the reduction could exceed 20% due to withdrawal penalties and taxes (IRS, 2024).
Then there is future income. For the 2024 tax year, the form multiplied your remaining monthly income by 12 for offers paid within five months and by 24 for offers paid within six to 24 months. This was then added to your asset equity (IRS, 2024). 'Remaining' refers to the amount left after permitted living expenses have been deducted.
These living expenses follow national and local standards. IRM 5.15.1 establishes national standards for food, clothing, personal care and out-of-pocket healthcare. You typically receive the food and other items allowance for your household size without having to provide proof of the exact amount (IRS, 2026). However, housing and transportation are allowed at the local standard or your verified actual cost, whichever is lower. Anything above the standard requires documentation (IRS, 2026).
Do you need an Armenian accountant who speaks Armenian? Heritage Web can put you in touch.
The paperwork — and how you pay a settlement.
IRM 5.8.1, revised May 25, 2023, confirms you must submit on the current revision of Form 656 (IRS, 2023). Form 656 is the offer itself; Form 433-A (OIC) is where you lay out your finances.
The documents are as important as the forms. The Form 433-A (OIC) attachment checklist asks for the following:
- recent earnings records
- investment and retirement statements
- three months of complete personal bank statements
- six months of business bank statements (if applicable)
- loan details
- any support orders
- proof of special circumstances
- disclosure of assets held outside the United States (IRS, 2024)
That last item deserves attention. Many Armenian families own property or bank accounts in Armenia or elsewhere abroad, or have inherited interests in such assets. The IRS expects to see those foreign assets as part of the picture. Failing to declare them is not a shortcut; it is a problem.
Once you have your number, you can choose how to pay.
- Lump-sum cash offer. For tax years 2024 and 2025, the IRS generally requires an initial payment of 20% with the application, followed by the remaining balance in five or fewer installments within five months of acceptance.
- Periodic payment offer. For the 2024 and 2025 tax years, you generally send the first proposed installment with the application and continue monthly installments while the IRS evaluates the offer, with payment completed within six to 24 months; qualifying low-income applicants are exempt from preacceptance installments (IRS).
Qualifying low-income applicants were exempt from those payments during consideration under both options (IRS, 2024–2025). And since November 1, 2021, the IRS discontinued offer in compromise refund recoupment, including on older Forms 656 that contained refund-waiver terms, as recorded in IRM 5.8.6 (IRS, 2021).
The Equity Fight and a Lesson from the Tax Court
A common sticking point is home equity. The IRS may assume that you can use the value of your house to pay your debts. However, this may not be the case.
In Whittaker v. Commissioner, T.C. Memo. 2023-59 (May 15, 2023), the U.S. Tax Court held that a settlement officer's conclusion that the taxpayers could access their home equity was clearly erroneous on the record, and that relying on that equity in their reasonable collection potential was an abuse of discretion. The court sent the case back for further consideration (U.S. Tax Court, 2023).
The point is not that you will necessarily win in court. Rather, it is that the valuation of your assets is contestable and errors can occur. This is precisely why a thorough professional review is preferable to a guess, particularly when English is your second language and the forms are unforgiving.
One related note for 2020 and 2021 debts. Notice 2024-7, announced December 19, 2023, gave automatic relief from certain failure-to-pay additions for eligible tax year 2020 and 2021 income-tax liabilities assessed below $100,000 per return, excluding penalties and interest when applying that threshold (IRS, 2023). That relief period ran through March 31, 2024, with failure-to-pay penalties resuming April 1, 2024 (IRS, 2024). Notably, Notice 2024-7 excluded additions already settled through an accepted offer under IRC §7122 (IRS, 2024).
Getting help in your own language
You don't have to face the IRS alone, nor do you have to do so in a language you are still learning. According to a 2024 report, there are approximately 460,000 Armenian Americans, around half of whom live in California (PBS NewsHour, 2024). Community resources are available close to home.
The Social Services department of the Armenian Relief Society of Western USA runs offices in Glendale, Hollywood, and Pasadena. They offer free case management and referrals, providing services in Armenian, Arabic, Farsi, Russian, Spanish, and English to help immigrants and refugees overcome language and cultural barriers (Armenian Relief Society of Western USA, 2025). The offices are located at 517 West Glenoaks Boulevard, Glendale, California 91202, and can be reached by phone on 818-500-1343 (Armenian Relief Society of Western USA, 2025).
Low Income Taxpayer Clinics can represent eligible taxpayers in IRS collection disputes, appeals and court cases. They also provide education on taxpayer rights to people for whom English is a second language, either for free or for a small charge. Clinics are listed in IRS Publication 4134 (Taxpayer Advocate Service, 2024). The Taxpayer Advocate Service also made its website available in 13 languages in 2024, although these services are not specific to the Armenian community (Taxpayer Advocate Service, 2024).
State rules differ, too. For example, an offer in compromise under IRC §7122 compromises federal tax liabilities only, so a federal offer does not by itself resolve a state balance. Check with your state revenue department separately.
Where to go from here?
For the right person, an offer in compromise can be life-changing — but for the wrong person, it can be a waste of money. Before paying any company that promises to 'settle for pennies', get an honest assessment of your situation from someone who understands the rules. Whether an offer, an installment agreement or simply fixing unfiled returns is the better option depends entirely on your financial situation.
Get in touch with an Armenian accountant who speaks your language and understands your culture. Submit your details via Heritage Web's secure referral form.
This article is general information, not tax advice. Tax rules change each year; speak with a CPA or enrolled agent about your situation.