Offer in Compromise Application Fee & the Low-Income Waiver

Filing a federal Offer in Compromise costs money before the IRS reads a word: a $205 application fee plus an initial payment that depends on your payment structure. One certification — low-income certification — can waive all of it. This page is the complete money-up-front picture: the amounts, the separate-check rule that trips applicants, what is (not) refundable, and the waiver test with its two ways to qualify.

General tax information, not tax or legal advice. Fee set by statute/regulation (26 U.S.C. §7122 and the user-fee rules); confirm the current figure on IRS.gov before filing — it has changed across the years ($186 → $205 in 2020).

The upfront money, in one table

The separate-check rule (a processability trap)

Form 656-B is explicit: the application fee and the initial payment go on separate checks or money orders, both payable to the U.S. Treasury, and neither combined with payments for anything else. Combining them is a classic cause of processing defects (mistakes catalogue). Undesignated payments are applied at the IRS’s discretion; if you need a payment tied to a specific period, designate it in writing with the packet (mechanics in the application sequence).

What is refundable (almost nothing)

• The $205 fee: non-refundable once the offer is processed.
• The 20% / periodic payments: non-refundable — if the offer is rejected or withdrawn, payments are applied to your tax balance. They are not lost money (they reduce what you owe), but they are not coming back as cash.
• This asymmetry is why the qualification check and calculator come before the checks.

Low-income certification: the test

Certification is claimed on Form 656 by checking the certification box and meeting either measure, using the IRS’s table of 250% of the federal poverty level by family size and location (48 contiguous states/DC, Alaska, Hawaii):

1. Adjusted gross income test — your household AGI (most recent return) at or below 250% of the federal poverty level for your family size, or
2. Gross monthly income test — your household’s gross monthly income × 12 at or below that same 250% figure (used when AGI does not reflect current circumstances). Effects of certifying: no application fee, no initial payment, and no monthly payments while the IRS reviews (accepted offers still must be paid, on the structure’s schedule after acceptance, with the total timeline adjusted). Limits: certification is for individuals only — sole proprietors qualify; corporations, partnerships, and entity LLCs do not (433-B page). The IRS verifies the claim against its records; a false certification risks the offer.

Where the $205 sits in the total cost of an offer

The fee is the smallest line in a realistic budget: your initial payment (20% can be four figures), any professional help, and the opportunity cost of the tolled collection clock (timeline). Anyone quoting you only the $205 is selling something.

Frequently asked questions

How much does it cost to apply for an Offer in Compromise? $205 in application fee, plus 20% of the offer (lump-sum) or the first monthly payment (periodic) — the answer TaxWave’s IRS OIC FAQ gives, matching the IRS’s own OIC page: “Every OIC application requires a $205 application fee…” unless waived.

Do I qualify for the low income certification? If your household income meets either the AGI test or the gross-monthly-income test against the IRS’s 250%-of-poverty table on Form 656, yes — this is the IRS FAQ’s own question, and the two-test mechanics above are how it is decided.

Do you qualify for Low-Income Certification? Form 656 asks it in this form (its printed question), because the answer changes the packet itself: certified filers enclose no fee and no initial payment. Print the current Form 656 poverty table for your family size and state group and test both measures before deciding.

General tax information, not tax or legal advice. Sources: 26 U.S.C. §7122 (user fee and low-income exception); IRS Offer in Compromise page and FAQs; Form 656 and Form 656-B (fee instructions and poverty-level table); IRS newsroom waiver announcements; TaxWave FAQ (questions). Reviewed 2026-10-22.