Offer in Compromise
OIC Low Income Certification: The Fee and Down-Payment Waiver, Explained (2025)
The short answer: the OIC low income certification lets lower-income taxpayers skip the upfront cost of an Offer in Compromise. If your household income is at or below 250% of the federal poverty guidelines for your family size, you check the Low-Income Certification box on Form 656 — and the IRS waives the $205 application fee and your initial down payment.
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⏱ The key number: 250% of the federal poverty guidelines. The exact dollar amount depends on your family size and where you live, and it updates each year. Form 656 prints a current income table so you can confirm you qualify before you submit — check it against your numbers the same day you fill out the form.
What the OIC low income certification is
An Offer in Compromise (OIC) is the program that lets you settle a tax debt for less than the full amount you owe — when your finances genuinely can't cover it. Normally, applying costs money up front: a $205 application fee plus an initial payment toward your offer. For someone already struggling, that upfront cost can be the wall that stops them from applying at all.
The low income certification is the door in that wall. It's a single box in Section 1 of Form 656. If your income falls at or below 250% of the federal poverty level, you check it — and the IRS waives the fee and the down payment entirely. You'll find the official program details on the IRS Offer in Compromise page.
One thing to be clear about: this is a waiver of upfront costs, not a discount on the offer itself. If the IRS accepts your offer, you still pay the offer amount you proposed.
Who qualifies under the 250% rule
Qualification is based on your household, not just you. The IRS compares your adjusted gross income — or your monthly household income times twelve — against 250% of the federal poverty guidelines for your family size and state. The U.S. Department of Health and Human Services publishes the underlying federal poverty guidelines each year, and Form 656 turns them into a simple table you can read in a minute.
A rough sense of scale: 250% of poverty for a single person works out to roughly the low-to-mid $30,000s in annual income, rising with each additional family member. Because the exact thresholds change every year, always use the current table printed on the version of Form 656 you're filing.
Two limits to know:
- Individuals only. Businesses filing an offer cannot use the low income certification. The waiver is for individual taxpayers.
- It's based on income, not assets. Even if you have some assets, you can still qualify for the fee waiver if your income is under the threshold — though those assets still matter when the IRS decides whether to accept your offer.
What the waiver actually covers
When you qualify and check the box correctly, three things change:
- The $205 application fee is waived. You don't send it with your package.
- Your initial down payment is waived. Normally you'd include a payment with your offer (20% for a lump-sum offer, or the first monthly payment for a periodic offer). With the certification, you send neither.
- You skip monthly payments during review. If you chose a periodic payment offer, you normally keep making the proposed monthly payments while the IRS evaluates your case. The low income certification pauses that requirement until a decision is made.
For a deeper walkthrough of how this fits the rest of the application, see our guide to the low-income OIC fee waiver and our Form 656 walkthrough.
What it does NOT do — the honest part
The certification removes upfront cost. It does not change how the IRS decides your offer. That decision runs on a formula called reasonable collection potential — your assets plus what the IRS thinks you can pay from future income. A low income often helps that math, but the waiver and the acceptance are two separate things.
This is also where a lot of people get hurt. Anyone promising to settle your debt for "pennies on the dollar" before they've looked at your assets and income is selling you something — not telling you the truth. The fee waiver gets you in the door cheaply; it does not guarantee the door opens.
How to claim the low income certification, step by step
- Get the current Form 656 booklet from IRS.gov. The income table changes yearly, so use the latest version.
- Find Section 1 of Form 656 and locate the Low-Income Certification box.
- Read the income table. Match your family size to your state column, then compare your monthly household income to the figure shown.
- If you qualify, check the box. Then prepare your offer without the $205 fee and without the down payment.
- Submit your complete package — Form 656, your financial statement (Form 433-A (OIC)), and the supporting documents the booklet lists. Keep a full copy of everything.
- Track your file. Offers commonly take six to twelve months to work through the system. Stay current on filing and any required estimated payments while you wait, or the offer can be returned.
See your likely offer amount in about 2 minutes
Before you decide anything, our free Offer in Compromise Calculator runs your income, expenses, and assets through the same Reasonable Collection Potential formula the IRS uses to estimate the lowest amount the IRS may accept to settle your debt. No sign-up, instant result.
Estimate my offer →OIC low income certification questions, answered
Who qualifies for the OIC low income certification?
You qualify if your household's adjusted gross income is at or below 250% of the federal poverty guidelines for your family size and where you live. Individual taxpayers use Section 1 of Form 656 to check the Low-Income Certification box. Businesses cannot use it — the waiver is for individuals only.
What does the OIC low income certification actually waive?
It waives the $205 application fee and the initial down payment that normally come with an offer. If you file a periodic payment offer, you also don't have to make the monthly payments while the IRS reviews your case. You still have to pay the offer amount itself if it's accepted.
How do I claim the low income certification on Form 656?
In Section 1 of Form 656, find the Low-Income Certification box, check it, and use the income table printed on the form to confirm your family size and monthly income qualify. When you qualify, you do not send the $205 fee or the down payment with your application.
Does the low income certification make my offer more likely to be accepted?
No. The certification only removes the upfront fee and down payment. The IRS still decides your offer using your reasonable collection potential — your assets plus future income. A low income can help that math, but the waiver and the acceptance decision are two separate things.
What if I paid the fee but should have qualified for the waiver?
If you qualified for the low income certification but paid the $205 fee or down payment anyway, contact the IRS unit handling your offer and ask about a refund of the amounts that should have been waived. Keep copies of your Form 656 and proof of income in case you need to show you met the 250% threshold.
This guide is general information, not tax or legal advice for your specific situation. Eligibility for IRS programs depends on individual facts and circumstances; no outcome is guaranteed.