The LTR 2840C is good news. Your Offer in Compromise has been accepted. The IRS has agreed to settle your tax debt for less than the full amount. But this letter is also the beginning of a five-year compliance period that, if violated, can undo the entire deal.
The Five-Year Compliance Period
The acceptance terms require that for five years from the date the IRS accepts your offer (or five years from the date of your last payment, whichever is later), you must file all tax returns on time, pay all taxes on time, make all estimated tax payments on time, not incur any new tax debt, and comply with all other terms of the offer agreement.
Violate any of these conditions and the IRS can default your offer. Default means the original tax debt is reinstated in full, minus any payments you made. The IRS keeps your offer payments and then comes after you for the remaining original balance. All the time, effort, and money you invested in the offer process is lost.
The Most Common Default Triggers
The number one cause of OIC default is failing to file the next year's tax return on time. You settle your 2020-2022 tax debt through an offer, then you file your 2025 return late. Default. The IRS reinstates the full original balance.
The number two cause is incurring a new balance. You file your 2026 return on time, but you owe $3,000 and don't pay it with the return. That new balance is a compliance violation.
The number three cause is failing to make estimated tax payments. If you're self-employed, adequate estimated tax payments are part of the deal.
How to Stay Compliant
Adjust your withholding or estimated tax payments so you don't owe at the end of the year. Set calendar reminders for every filing deadline. If you're self-employed, make quarterly estimated payments even if you're not sure of the exact amount. Overpaying estimated taxes and getting a small refund is infinitely better than underpaying and defaulting your offer.
Keep the LTR 2840C in a safe place. You may need it to prove the offer was accepted if there's ever a dispute.
If you've received an LTR 2840C, congratulations. Now call us at (813) 229-7100 if you need help staying compliant through the five-year period.