According to legend, the Offer in Compromise (OIC) program originated with boxer Joe Louis, who, like many boxers, ea
ed a substantial income during his fights but fell drastically behind on his taxes in the 1930s. Sympathetic to Mr. Louis—one of the most beloved figures of his time—the IRS developed a plan to help him settle his tax debts.

Following this event, in the early 1970s, the Offer in Compromise program officially became part of the law. Later, the bipartisan Tax Reform Act of 1986 provided the program with its formal structure.

By the late 1990s, the program had gained significant popularity, becoming a part of American culture through radio and TV ads. Companies like American Tax Relief and JK Harris (both now defunct, the latter shut down by the FTC) promoted the program heavily. Commercials often featured actors on construction sites, removing their hard hats to celebrate escaping massive tax debts, with dollar signs flashing on the screen. Promises like “Reduce your debt by 95%, 90% of what you owe!” became commonplace.

Key Changes to the Program

In the last decade, significant updates were made to the OIC program:

• A 20% upfront payment was required for Offers.

• A $186 application processing fee was introduced to discourage frivolous submissions.

In May 2012, the IRS implemented the most substantial changes to the Offer in Compromise program in its history, further refining its rules.

What Is an Offer in Compromise?

An OIC allows you to settle your tax debt for less than the full amount owed. It´s a legitimate option if you cannot pay your full tax liability or if doing so would create financial hardship. The IRS evaluates offers based on:

• Ability to pay

• Income

• Expenses

• Equity in assets

The IRS generally approves an OIC, also known as the "Fresh Start Program," when the amount you offer is the most they can expect to collect within a reasonable timeframe.

Before submitting an Offer in Compromise, it´s essential to explore all other payment options. The program isn´t for everyone and is only available to those who qualify. Be sure to verify the qualifications of any tax professional you hire to assist you with your submission.