GOVERNMENT OF THE DISTRICT OF COLUMBIA
OFFICE OF THE CHIEF FINANCIAL OFFICER
OFFICE OF TAX AND REVENUE
OFFER IN COMPROMISE
Form OTR-10 Booklet
Content
What is an Offer in Compromise (OIC)?
What is the Offer in Compromise Program?
Who is Eligible?
Important Facts
Payment Options
How do I compute the amount of my Offer?
Instructions for submitting Form OTR-10
Instructions for Completing Forms PA-1 and PA-2
Form OTR-10
If you have any questions regarding OIC qualifications, please call (202) 724-5045, or visit our website at
www.taxpayersevicecenter.com: click: tax forms/publications, from the Miscellaneous Forms drop-down window, select and download
Offer in Compromise Form (OTR10).
1101 4th Street, S.W. Suite 270W, Washington, DC 20024‐(202)727‐ 4TAX (4829)
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What is an Offer in Compromise (OIC)?
An Offer in Compromise (OIC) is an agreement between the taxpayer and the OTR that allows the taxpayer to
settle their tax debt for less than the full amount owed. It may be a legitimate option if the taxpayer can't pay the full
tax liability, or doing so creates a financial hardship.
The Office of Tax and Revenue (OTR) will consider an offer to settle unpaid tax liabilities for less than the full
amount due when there is a reasonable doubt as to the liability of the taxpayer or the collectibility of the tax imposed
under title D.C. Code § 47-4404.
The ultimate goal is a compromise that suits the best interest of both the taxpayer and the OTR. To be considered,
generally you must make an appropriate offer based on what the OTR considers your true ability to pay.
Submitting an offer application does not ensure that it will be automatically accepted by OTR. It, your offer, does
however begins a process of evaluation and verification by the OTR, taking into consideration any special
circumstances that might affect your ability to pay.
Generally, the OTR will not accept an offer if you can pay your tax debt in full via an installment agreement or a
lump sum payment.
What is the Offer in Compromise Program?
The Offer in Compromise program is used to resolve tax liabilities for income tax, sales and use, withholding tax,
or any other tax administered by the OTR when the taxpayer is unable to pay in full and all other efforts to resolve
the liability have been unsuccessful.
The OIC program is not an appeal of the taxpayer’s liability. Instead, under the program, the OTR looks at the
taxpayer’s available resources and assets, and considers the resources in light of the taxpayer’s circumstances to
arrive at an equitable resolution of the taxpayer’s liability by considering a reduction or abatement of the amount of
tax due.
Who is eligible?
You have incurred a delinquent tax liability that has resulted in an assessment
You have exhausted all other avenues of administrative appeal.
You cannot make an offer in compromise if there is any issue remaining or currently being appealed
You must be current with all tax returns you are legally required to file
You either are without resources or unable to apply present and/or future resources to paying the
outstanding tax liability.
You or your business is currently in an open bankruptcy proceeding, you are not eligible to apply for an
offer. (Note: Any resolution of your outstanding tax debts generally must take place within the context of
your bankruptcy proceeding.)
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Other Important Facts
Penalties and interest will continue to accrue while your OIC is being evaluated.
You may not submit an offer for tax years that have not been assessed
If you currently have an approved installment agreement with OTR in good standing, then you may
suspend making those installment agreement payments when you submit an offer. If your offer is rejected
for any reason, your installment agreement with OTR will be reinstated and payments must resume within
30 days of the date of the rejection.
All decisions under the Offer in Compromise Program are final and cannot be appealed. For this reason,
you should carefully consider the facts and arguments submitted with the original offer.
You must remain current with respect to future filings for at least five years after the Offer in Compromise
is accepted. If you do not, the full liability will become due immediately and the OTR will pursue all
necessary action to collect.
OTR will review the Offer in Compromise and determine if there is sufficient reason for a reduction or
abatement of the assessment.
If OTR determines that no grounds for an adjustment exist, you will be notified that your offer has been
declined. The OTR will consider another offer if your circumstances change.
If OTR determines that grounds for an adjustment exist, but that the amount offered is insufficient, you will
be advised as to an acceptable offer amount.
If OTR determines that your offer is acceptable, you will be notified.
You must pay the offer amount within 30 days of the accepted offer. Failure to do so will result in the offer
being voided.
All agreed upon terms must be adhered to or the accepted offer will become null and avoid. And, all
collection enforcement activity will resume.
Payment Options
Submitting an OIC requires the selection of a payment option as well as sending an initial payment with your
application. The amount of the initial payment and subsequent payments will depend on the total amount of your
OIC and which of the following payment options you choose.
Lump Sum: This option requires that 100% of the total amount of the Offer is paid when the application is
submitted.
Periodic Payment: This option requires that a 20% first payment is submitted with the Offer, and the remaining
balance paid in five or fewer payments within 12 months of the date your offer is accepted. (Note: Under this
option, you must continue to make all subsequent payments while OTR is evaluating your OIC. Failure to make
these payments will result in default, rendering the OIC null and void.)
The length of the payment option you choose may affect the amount of the offer that OTR will accept.
o An OIC paid within five months of acceptance might result in a lesser amount.
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o In all cases, your OIC amount must be paid within 12 months of the date the OIC is accepted.
Your OIC amount cannot include a refund that you are due from OTR; however any further refunds may be
withheld and applied to an outstanding liability.
In the event that your OIC is denied, any payment(s) submitted at the time of filing or thereafter will not be
refunded. Payment(s) will be applied to the outstanding tax debt.
You may need to consider borrowing money from a bank, family and/or friends if you are unable to honor
the OIC.
If retirement savings from an IRA or 401k plan are utilized to satisfy this obligation, there will be future tax
liabilities owed. Contact OTR or your tax advisor prior to choosing this action.
Future Tax Obligations
If your OIC is accepted, you must continue to file and pay any future tax obligations. If you fail to file and pay
any tax obligations that become due within the five years after your OIC is accepted, your OIC may be defaulted. If
your OIC is defaulted, all compromised tax debts, including penalties and interest will be reinstated.
How to apply for an Offer in Compromise
The application process involves completing and transmitting the following:
Form OTR-10, Offer in Compromise (OIC)
Form PA-1, Collection Information Statement for Individuals, if applicable. (Note: OTR will accept the
IRS Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, in
lieu of Form PA-1, if filed with the IRS within the past six (6) months).
Form PA-2, Collection Information Statement for Businesses, if applicable. (Note: OTR will accept the IRS
Form 433-B, Collection Information Statement for Businesses, in lieu of Form PA-2, if filed with the IRS
within the past six (6) months.)
Submitting an initial payment with your OIC packet. (See Payment Options)
When you complete the Form OTR-10, you should address all of the reasons you believe you cannot, or should not,
pay the full amount due. You should offer an amount you are able to pay. A mere unwillingness to pay will not
excuse you. OTR will consider the following circumstances when deciding whether or not to accept your offer in
compromise:
Doubt as to liability
If you believe you don’t owe the amount due, you must include with a Form OTR-10 a detailed explanation of the
reason(s) you believe you don’t owe the tax.
Insufficient resources
If you don’t have enough assets or income to pay the full amount, you must include with Form OTR-10 a complete
financial statement, Form PA-1 for individuals and/or PA-2 for businesses.
Economic or other hardship
If you have enough assets to pay the full amount, but believe that because of your exceptional circumstances
requiring full payment would cause an economic hardship or would be unfair and inequitable, you must include with
Form OTR-10 a complete financial statement, Form PA-1 and/or PA-2.
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Reasons for a rejected OIC
OTR will not process your OIC application, if the following exist:
An official Form OTR-10 is not submitted
Pre-printed terms on the form have been altered
Taxpayer is not identified
Taxpayer Identification Number is not included (i.e., SSN, EIN, ITIN)
An amount is not offered and/or payment terms are not stated
Appropriate signatures are not present
Forms PA-1 & PA-2, if required or subsequent balance sheets and income statements are not included with
packet or are incomplete
If OTR determines that the amount offered is less than your equity in assets and available income
You have not filed all tax returns you are legally required to file
You don’t meet the following criteria: Doubt as to Collectibility; Doubt as to liability; Insufficient
Resources; or Economic or Other financial hardship
Filing Status
If you are Single, Married, Married filing separately, you must:
Submit one Form OTR-10 to include all tax years you would like to submit an OIC. (PA-1)
If only one spouse owes tax, but both have income, prepare Form PA-1 using only the liable spouse’s
income and expense information. OTR will require disclosure of financial information of the non-liable
spouse during our evaluation process.
If you are a Business and would like to submit an offer, you must:
Submit one Form OTR-10 to include all parties responsible for the tax debt, along with the appropriate
financials (PA-2)
If you owe business income tax, you must submit a Form PA-1 for all persons responsible for the tax debt,
and Form PA-2 for the business.
If you and Your Spouse/Domestic Partner/ex-spouse owe joint and/or separate tax debts, you must:
Submit one Form OTR-10 with all of the joint tax debt(s), and a second Form OTR-10 with your individual
tax debt(s).
If you and your spouse/domestic partner/ex-spouse have joint tax debt and your spouse/domestic
partner/ex-spouse does not want to submit a Form OTR-10, you may submit a Form OTR-10 to
compromise your responsibility for the joint debt.
1101 4th Street, S.W. Suite 270W, Washington, DC 20024‐(202)727‐ 4TAX (4829)
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How do I compute the amount of my Offer?
You will receive more favorable consideration if you offer a substantial portion of the total tax and penalty and
interest due; or you offer money you can raise only under condition that your tax is settled. Examples: personal
loans from friends or family, bank loans, and proceeds from contracts you are able to make if tax liens are released.
Additionally, OTR will consider your offer more favorably if you submit all or a substantial portion of the offer
amount with your offer request to demonstrate your sincerity. Any money submitted with an offer is non-refundable
in the event the offer is rejected.
In determining the amount that would be acceptable to compromise your tax liability, a Revenue Officer will review
your offer application, and conduct a thorough examination to ensure the following:
You accurately included all assets and income available to you.
You claimed only the necessary expenses allowable for the health and welfare of you and your family, and
to provide for production of income.
OTR may request additional information from you. If OTR does not receive the requested info during the allotted
timeframe, the offer may be rejected. Additionally, OTR may accept or reject the offer if it does not cover the
required tax. At this time, OTR may ask you to increase the amount of the offer or simply reject the offer.
If your Offer is accepted
We will confirm acceptance by mail.
You should promptly pay any unpaid offer amounts or within the allotted timeframe.
You must comply with all contractual terms and conditions of the offer.
OTR will release all tax liens when the offer amount is paid in full.
Failure to adhere to the five-year compliance requirement to file all returns and pay all amounts due may
result in default of your offer. If this occurs, the unpaid compromised tax liability will be reinstated; any
released tax liens will be reinstated; and the collection process will resume.
If your Offer is rejected
You may submit another offer with different payment terms within 30 days of denial.
Doubt as to Collectability
If you are filing an OIC due to Doubt as to Collectability, you must:
Complete a Form PA-1, Collection Information Statement for Individuals
Complete a Form PA-2 Collection Information Statement for Businesses and submit with Form OTR-10.
Important: You must attach a copy of your latest Federal Income Tax Return(s) for the business, and for all
Individuals responsible for the tax who submit this offer.
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OFFERINCOMPROMISE
The information you provide must be current and complete and reflect activity within the 6 months prior to
the date you submit the offer. OTR uses this information to evaluate the offer.
Do not include information relating to unsecured creditors. (Example: do not include amounts you owe on
credit cards, loans, or any item without pledging assets as security.)
If you owe business income tax, you must submit a Form PA-1 for all persons responsible for the tax debt,
and Form PA-2 for the business.
If only one spouse owes tax but both have income, prepare Form PA-1 using only the liable spouse’s
income and expense information. OTR will require disclosure of financial information of the non-liable
spouse during our evaluation process.
Assets or income available to you but not available to OTR for direct collection action should be included
on the financial statement. Even if OTR may not collect directly from the assets, those assets are available
to raise funds and should be included in the offer packet.
Completing the OIC packet
Step 1 – Gather Your Information
To calculate an OIC amount, you must gather information about your financial situation, including cash,
investments, available credit, assets, income and debt.
You must gather information about your average gross monthly household income and expenses. The entire
household includes you, your spouse/domestic partner, significant other, children, and others that reside in the
household. This is necessary for OTR to accurately evaluate your OIC. OTR will not accept expenses for tuition
for public and private elementary and secondary schools, or other unsecured debt payments as part of the expense
calculation.
Step 2 – Fill out Form PA-1
Complete the Form PA-1 or submit the IRS Form 433-A (OIC) if you are an individual wage earner and/or a self-
employed individual. This will be used to calculate an appropriate OIC amount based on your assets, income,
expenses, and future earning potential. You will have the opportunity to provide a written explanation of any special
circumstances that affect your financial situation (for details, see “How to Apply”).
Step 3 – Fill out Form PA-2
Complete the Form PA-2 or submit the IRS Form 433-B (OIC) if your business is a Corporation, Partnership,
Limited Liability Company (LLC) classified as a corporation, single member LLC, or other multi-owner/multi-
member LLC. This will be used to calculate an appropriate OIC amount based on your business assets, income,
expenses, and future earning potential. If you have assets that are used to produce income (ex: a tow truck used in
your business for towing vehicles), you may be allowed to exclude equity in these assets. (For details, see “How to
Apply”).
Step 4 – Attach required documents
You must attach supporting documentation with Form(s) PA-1 and PA-2 or IRS 433-A or B. A list of the
documents required will be found at the end of each form. (Note: Do not send original documents.)
Step 5 – Fill out Form OTR-10, Offer in Compromise (OIC)
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Complete a Form OTR-10. This form serves as your OIC contract. It identifies you as the taxpayer, the tax years
and type of tax that you would like to compromise. It also identifies your OIC amount and the proposed payment
terms. Be sure to sign and date the Form OTR-10. Failure to do so may result in a rejected offer.
Step 6 – Include payment
Include a credit card, certified funds, or money order for your initial payment based on the payment option you
selected. If lump-sum offer is selected, 100% of the OIC amount must be submitted along with OIC packet. If
periodic payment is selected, a 20% first payment is due when the OIC packet is submitted. Additionally, if you
choose the periodic payment option, the subsequent payments must follow in five or fewer payments, not to exceed
a 12 month period. (Note: Please maintain a copy of your OIC package and payment history for your records.)
Instructions for completing Form OTR-10
Failure to follow these instructions may result in OTR rejecting your offer. Questions may be directed to the
Revenue Officer responsible for your case; if none please contact (202) 724-5045:
Line 1 - Enter the taxpayer’s name and home and/or business address, including a mailing address if different.
Line 2 – Enter the Marital Status (Single, Unmarried (Single, Divorce Widowed), Name and age of all dependents
Line 3 - Enter the name and social security number of all persons submitting the offer.
Enter the business tax number of the business submitting the offer. Also, Show the business tax numbers for all
other businesses you own. Under the terms of the offer you must comply with the filing and paying requirements of
the tax laws for 5 years after the accepted compromise.
Line 4 - Enter the total amount of tax, penalty and interest, for all taxes you seek to compromise. Prepare a separate
schedule listing the type of tax, tax period and the amount of each tax bill you seek to compromise.
Line 5 – Check the circumstance which applies to your OIC. You must complete Line 7. If Doubt as to
Collectability, you must submit Form PA-1 or PA-2, whichever is applicable.
Line 6 – Enter the total amount of your offer. Do not include amounts you have already paid; OTR has already
collected, or is due to receive. Enter proposed payment terms if you cannot pay the amount offered in full. If OTR
determines that you can pay in less time, the offer will be rejected and/or other terms will be requested.
Line 7 – Explanation of circumstances why you are requesting an offer in compromise. Please provide a detailed
written statement. If you require additional space, please attach additional sheet to the OTR-10 application.
Line 8 – It is important that you thoroughly read and understand the contractual requirements in this section. All
persons submitting the offer should sign and date Form OTR-10.
Instructions for Completing Forms PA-1 and PA-2
Be sure to read the terms and definitions below to aid you in preparing the Forms PA-1 and PA-2. Be sure to
complete every item on each form; if an item doesn’t apply, you must enter “N/A”.
Current Market Value: The reasonable amount that you expect to be paid for the asset if you sold it. Do not guess
you must use accurate information.
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Necessary Expenses: (Not for business entities) Expenses needed to provide for you and your family's health and
well-being. Do not include tuition for private elementary and secondary schools; however, you may include public
or private college tuition and expenses.
Generally Allowed: Charitable contributions, voluntary retirement benefits, unsecured debts, and cable television
charges.
Equity in Assets: Current market value of asset minus current balance due on loan(s) or mortgage(s).
Where to file the OIC application?
File your offer in compromise at Office of Tax and Revenue, 1101 – 4
th
Street, S.W., Suite 270W, Washington, DC
20024. If you have been working with a specific OTR employee, please contact that person prior to filing the offer.
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FORMOTR‐10
OFFERINCOMPROMISE
OFFICEOFTAXANDREVENUE
ApplicationForWageEarners,Self‐Employed
Individuals,andBusinesses
1a.FullNameofTaxpayerandSpouse(ifapplicable)
_______________________________________________________________
1c.HomePhone
()______________________
1d.CellPhone
()________________________
1b.MailingAddress(Street,City,State,ZipCode)
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
1e.BusinessPhone
()______________________
1f.BusinessCellPhone
()________________________
2a.MaritalStatus:MarriedUnmarried(Single,DivorcedorWidowed)
_______________________________________________________________
2b.Name,Age,andrelationshipofdependant(s)
_______________________________________________________________
_______________________________________________________________
3a.NamesandSocialSecurityNumbersofallpersonssubmittingthisoffer
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
3b.BusinessTaxNumber(s),includedwiththisoffer
_______________________________________________________________
_______________________________________________________________
3c.OtherBusinessTaxNumber(s)notincludedwiththisoffer
______________________________________________________________
4a.I/We(IndividualTaxTypeTaxpayers)submitthisoffertocompromisethe
tax liabilities plus any interest, penalties, additions to tax, and additional
amountsrequiredbylaw(taxliability)forthetaxtypeandperiodbelow:
IndividualIncomeTax
TaxPeriod(s):____________________________________________________
________________________________________________________________
________________________________________________________________
4b.I/We(
BusinessTaxTypeTaxpayers)submitthisoffertocompromise the
tax liabilities plus any interest, penalties, additions to tax, and additional
amountsrequiredbylaw(taxliability)forthetaxtypeandperiodbelow:
Sales&Use
WithholdingTax
OtherTax(es)/Fee(s)
PleaseSpecifyTaxPeriod(s):
________________________________________________________________
________________________________________________________________
5.I/Wesubmitthisofferforthereason(s)checkedbelow:
DoubtastoLiability‐Ifyoubelieveyoudon’towetheamountdue,you
mustincludewithaFormOTR‐10adetailedexplanationofthereason(s)
youbelieveyoudon’towethetax.
InsufficientResources‐Ifyoudon’thaveenoughassetsorincometopay
thefullamount,youmustincludewithFormOTR‐10acompletefinancial
statement,FormPA‐1forindividualsand/orPA‐2forbusinesses.
EconomicorOtherHardship‐Ifyouhaveenoughassetstopaythefull
amount,butbelievethatbecauseofyourexceptionalcircumstances
requiringfullpaymentwouldcauseaneconomichardshiporwouldbe
unfairandinequitable,youmustincludewithFormOTR‐10acomplete
financialstatement,FormPA‐1and/orPA‐2.
6.I/Weoffertopaythefollowing:
LumpSum–100%‐$______________________
6b.I/Weoffertopayusingthefollowingterms:
PeriodicPayment–20%initialpayment‐$_____________________
Otherproposedpaymentterms–20%initialpayment
$_____________________
Pleasespecify:__________________________________________________
_______________________________________________________________
7.ExplanationofCircumstances‐Iamrequestinganofferincompromiseforthereason(s)listedbelow:
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DoubtastoliabilityDoubtastoCollectibilitySpecialCircumstances
Note:Ifyouarerequestingcompromisebasedondoubtastoliability,explainwhyyoudon’tbelieveyouowethetax.Ifyoubelievespecialcircumstancesexist
thatisaffectingyourabilitytofullypaytheamountoftax
due,pleaseexplain.Youmayattachadditionalsheetsifnecessary.
8.Underpenaltiesofperjury,I/WedeclarethatI/wehaveexaminedthisoffer,includingaccompanyingscheduledandstatements, andtothe bestofmy/our
knowledgeandbelief,theinformationprovidedistrue,correct,andcomplete.
____________________________________________________________________________________________________________________
SignatureofTaxpayerproponentDate
____________________________________________________________________________________________________________________
SignatureofTaxpayerproponent
Date
____________________________________________________________________________________________________________________
SignatureofTaxpayerproponentDate
FORINTERNALUSEONLY
ProposedOfferinCompromise
AcceptedRejected
Reasonforapproval/denial:
_______________________________________________________________________________________________
SignatureandTitleofOTROfficial
_____________________________________________________________
Date
____________________________________________
