Everyone Wants an Offer in Compromise But Not Everyone Qualifies
When people start looking for help with tax debt, one question almost always comes up first:
“Can I get an Offer in Compromise?”
That makes sense. An Offer in Compromise sounds like the simplest outcome. Settle your tax debt for less than you owe and move on.
But here’s the part most people don’t realize until much later:
An Offer in Compromise isn’t something you choose. It’s something the IRS decides you qualify for based on very specific financial rules.
The IRS looks closely at your income, your assets, your expenses and whether you’re staying current with your taxes right now. That’s why understanding eligibility matters before putting all your hope into one resolution option.
Knowing the rules upfront can save time, stress and disappointment and can help you move forward with a plan that actually fits your situation.
Reason #1 You May Not Qualify for an Offer in Compromise: Equity in Your Home
When the IRS reviews an Offer in Compromise, they look at what you own, not just what you owe.
If there is significant equity in your home, the IRS may determine that you have the ability to pay your tax debt through that asset. Even if selling your home is not something you would ever consider, the equity itself can still affect eligibility.
This is one of the most common reasons Offers are denied.
Understanding how assets are evaluated helps set realistic expectations from the beginning.
Reason #2 You May Not Qualify for an Offer in Compromise: Retirement Accounts
Another common obstacle is having a 401k or other retirement account with a balance that exceeds your tax debt.
The IRS often considers retirement accounts as available assets during an Offer review. Even though these funds are meant for the future, they can still impact whether an Offer is approved.
Many people are surprised by this rule, but it plays a major role in eligibility.
Knowing how the IRS views retirement savings helps you choose the right resolution path instead of chasing the wrong one.
Reason #3 You May Not Qualify for an Offer in Compromise: Non-Allowable Expenses
The IRS uses national standards to determine what it considers reasonable living expenses.
Some costs that feel essential, such as paying for a child’s college education, are typically not considered allowable under IRS guidelines. When expenses exceed those standards, the IRS may conclude that there is money available to pay toward tax debt.
IRS rules are specific. Clarity makes the process easier to navigate.
Reason #4 You May Not Qualify for an Offer in Compromise: High Car Payments
Vehicle expenses are also limited by IRS guidelines.
If you have a car payment that exceeds what the IRS allows, it may signal to them that you have disposable income that could be applied to your tax balance instead. That perception alone can affect approval.
Understanding IRS standards helps prevent surprises later in the process.
Reason #5 You May Not Qualify for an Offer in Compromise: Not Being Tax Compliant
Before the IRS will even consider an Offer in Compromise, all required tax returns must be filed and current tax obligations must be up to date.
This is especially important for self-employed individuals who are required to make quarterly estimated tax payments. The IRS will not settle old debt while new debt continues to accumulate.
Compliance is the foundation of every resolution option.
Reason #6 You May Not Qualify for an Offer in Compromise: Large Credit Card Payments
The IRS does not prioritize unsecured debt the same way households do.
Large monthly credit card payments may be viewed as funds that could instead be applied toward your tax debt. This can significantly reduce the likelihood of an Offer being approved.
The IRS looks at ability to pay very differently than families do.
Reason #7 You May Not Qualify for an Offer in Compromise: Spending Patterns
The IRS reviews bank statements carefully.
Frequent discretionary spending, such as consistently spending hundreds each week on online shopping or nonessential purchases, can indicate an ability to pay. That perception alone can prevent an Offer from being approved.
Spending patterns matter more than most people realize.
Paying Off Tax Debt Is a Powerful New Year Commitment
A new year often brings thoughts of renewal, fresh starts and forward momentum.
One of the most meaningful commitments you can make is addressing tax debt instead of carrying it quietly into another year. Tax debt does not go away on its own. Over time, it grows through penalties, interest and stress.
What feels easier to avoid today often becomes heavier later.
The new year is not about fear. It’s about choosing clarity and movement instead of staying stuck.
Committing to deal with tax debt can change how the entire year feels and open the door to solutions that actually fit your financial reality.