Will my high credit card limits impact my IRS Offer in Compromise (OIC) application?

Thanks for the explanation. Does the IRS actually expect people to max out credit cards to pay tax debt? That seems crazy to me. Wouldn't that just create more financial problems?

I went through this last year. Do they also check your credit report as part of the OIC review? I'm wondering if they can see all credit accounts or just what you disclose.

The IRS doesn't explicitly tell you to max out credit cards, but they do consider available credit as a resource you could potentially use. Their perspective is that if you have access to funds (even credit), that could factor into what they believe you can pay. You're right that maxing out cards can create new financial problems, which is why working with a tax professional is critical to properly present your full financial situation. The IRS generally relies on what you disclose on your Collection Information Statement (Form 433-A), but they can and do verify information. They may not pull a full credit report like a lender would, but they have ways to cross-reference financial information. Being completely honest on your application is crucial - omissions or inconsistencies can lead to automatic rejection.

How does this work exactly? Do real people review your documents or is it all automated? I'm nervous about sharing financial info with a random website.

Does it actually give you specific answers for OIC situations? My tax debt is from a business that failed during covid and I've got lots of personal credit cards that were used for that business. Would it help with that complicated scenario?

The system uses AI to review your documents, but there are tax professionals backing it up. They have serious security - everything's encrypted and they follow the same privacy standards that tax preparers use. It's not some random website, it's a legitimate tax service. For complicated OIC situations, that's exactly where I found it most helpful. It analyzes your specific scenario and gives tailored recommendations. In your case, it would help clarify how business-related personal credit card debt affects your OIC application and how to properly document that these were business expenses. That distinction can make a huge difference in how the IRS views your available resources.

Wait what? How does this even work? I thought it was impossible to get the IRS on the phone these days.

Sounds like a scam to me. Why would I pay someone else to call the IRS when I can do it myself for free? Even if hold times are long, I'd rather save the money.

It's actually pretty simple. They use a system that keeps dialing and navigating the IRS phone tree until they get through, then they have the IRS call you back. It's not impossible to reach the IRS yourself, but it can take hours or even days of attempts. I totally get the skepticism - I felt the same way initially. But when you factor in the time spent on hold (sometimes 2-3 hours per attempt) multiplied by several failed attempts, the value becomes clear. I wasted nearly two full workdays trying to get through before trying Claimyr. What's your time worth? For me, getting concrete answers about my OIC directly from the IRS was worth it, especially when critical deadlines were approaching.

Thanks! Did you close any accounts before submitting or keep them all open? And did they question you about why you weren't using the cards to pay the tax debt directly?

I kept all accounts open and documented everything honestly. They didn't specifically ask why I wasn't using the cards to pay the tax debt, but they did ask for clarification about my existing credit card balances and minimum payments. I think the key was that I clearly showed my current financial situation wasn't sustainable even without the tax debt - I was already struggling with basic living expenses. The OIC examiner seemed mostly concerned with verifying that I wasn't hiding assets or income. They did a thorough review of all my financial statements going back several months to confirm everything matched what I reported.

Actually that's not entirely true. The IRS can also look at your financial history from before you file, not just the exact moment you submit. My examiner questioned several account changes from nearly a year prior to my OIC submission.

This is exactly the kind of professional insight I was hoping to see! As someone just starting the OIC process, I really appreciate you clarifying how the RCP calculation actually works. The point about the IRS not expecting you to use credit that would push your obligations beyond sustainable levels is reassuring. I have a follow-up question about the 6-month rule you mentioned for avoiding major financial changes. What exactly qualifies as a "major" change? I'm wondering if paying down some credit card balances (not closing accounts) would be viewed negatively, or if that would actually help my case by reducing my monthly minimum payment obligations? Also, when you mention "allowable standards" for basic living expenses, are those the same standards the IRS uses for installment agreements, or are OIC evaluations different? I want to make sure I'm calculating my sustainable payment capacity correctly before submitting my application. Thanks for taking the time to share your professional perspective - it's incredibly valuable to hear from someone who works with these cases regularly!

Great questions! Regarding what constitutes a "major" change - paying down existing balances generally isn't viewed negatively, especially if you can document legitimate reasons (like reducing monthly obligations to better reflect your sustainable payment capacity). The IRS is more concerned about things like closing multiple accounts, transferring large sums between accounts, or making unusual financial moves that appear designed to manipulate your financial picture. Paying down balances can actually strengthen your OIC case if it demonstrates you're making good faith efforts to manage your overall debt situation responsibly. Just make sure you can explain the source of funds used for paydowns and that it doesn't contradict your claimed inability to pay the IRS. For allowable standards, OIC evaluations use the same Collection Financial Standards as installment agreements - these cover housing, transportation, food, clothing, healthcare, and other necessary expenses. However, OIC examiners often scrutinize these more carefully than installment agreement reviews. They may question expenses that seem high relative to your income or local standards. The key is being conservative and realistic in your expense calculations. Document everything with actual receipts and bills where possible. If you have legitimate expenses above the standard allowances (like medical costs or elderly parent care), make sure to include detailed documentation and explanations. I'd recommend reviewing the current Collection Financial Standards on the IRS website before finalizing your calculations - they're updated periodically and vary by family size and geographic location.

Great questions! Paying down credit card balances generally wouldn't be viewed as a problematic "major change" - in fact, it could help your case by reducing your monthly minimum payment obligations and showing responsible debt management. The IRS is more concerned about sudden asset transfers, closing multiple accounts, or other moves that might look like you're trying to hide resources. Regarding allowable standards - yes, the IRS uses the same National and Local Standards for both OIC evaluations and installment agreements. These cover housing, utilities, transportation, food, clothing, healthcare, and other necessary expenses. However, OIC cases allow for more detailed analysis of your specific circumstances. You can request amounts above the standards if you can document legitimate reasons (like higher medical costs or housing expenses due to disability). One key difference in OIC evaluations is that they're more flexible with "conditional expenses" - costs that might not be strictly necessary but would create hardship if eliminated. For example, if you're paying for your elderly parent's medications, that might be considered even if it's not technically required. My advice: use the IRS Collection Financial Standards as your baseline, but document any legitimate expenses above those amounts with supporting evidence. The goal is to show your true financial reality, not just fit into standard categories.

Great questions! Regarding "major" financial changes - paying down credit card balances generally isn't considered problematic, especially if you can document legitimate reasons (like reducing high-interest debt or freeing up monthly cash flow). What the IRS looks for are changes that appear designed to manipulate your financial picture, like suddenly transferring assets or closing multiple accounts right before filing. Paying down balances can actually strengthen your OIC case if it reduces your monthly minimum payments, thereby increasing your available income for an offer payment. Just make sure you can document where the money came from to pay down the balances - they'll want to see it came from regular income or legitimate asset sales, not from borrowing elsewhere. The allowable expense standards for OIC evaluations are similar to installment agreements but can be more flexible. The IRS uses their Collection Financial Standards, but in OIC cases, they may allow additional expenses if you can demonstrate they're necessary and reasonable. This is where documentation becomes crucial - medical expenses, certain transportation costs, and other necessities beyond the standard allowances can sometimes be justified. For calculating sustainable payment capacity, I recommend using the IRS's online Collection Financial Standards as a starting point, then documenting any additional necessary expenses with supporting documentation. The key is being able to defend every expense as necessary for basic living standards.