DATL Offer in Compromise: When You Do Not Owe What the IRS Says You Owe

A Doubt as to Liability Offer in Compromise, known as DATL, is an IRS settlement option for taxpayers who do not dispute their ability to pay. They dispute whether they owe the tax at all. It is built for situations where the tax assessment itself is the problem and if they can pay.

Most people have heard of an Offer in Compromise as a way to settle tax debt for less than the full amount owed based on financial hardship. That is a different type of offer called Doubt as to Collectibility. DATL works on a completely different premise: the IRS got the liability wrong.

What Is a DATL Offer in Compromise?

A DATL offer is a formal request asking the IRS to reduce or eliminate a tax liability because there is genuine doubt that the assessed amount is correct. It is filed using Form 656-L, a different form than the standard Offer in Compromise application.

The IRS will only consider a DATL offer when there is a genuine dispute about either the existence of tax liability or the correct amount of the tax liability. This is not a financial hardship argument. It is a legal and factual argument that the assessment itself was wrong.

The Three Types of Offer in Compromise

The IRS recognizes three distinct grounds for an Offer in Compromise, and understanding which one applies to your situation determines which form you file and what evidence you need.

Common Situations Where a DATL Offer Applies

• The IRS assessed tax based on an audit you never knew about because notices were sent to an old address
• A return was filed on your behalf by the IRS (a Substitute for Return) that overstates your actual income or omits deductions you were entitled to
• You were assessed a liability that actually belongs to a former spouse, a business partner, or another party
• The statute of limitations on assessment had already expired when the IRS assessed the tax
• A reported income document, such as a 1099, was issued in error and does not reflect income you actually received
• You can show the correct tax calculation differs materially from what the IRS assessed, and you have not had a prior opportunity to dispute it

A key qualifying detail: DATL is generally not available if you already had a prior opportunity to dispute the liability, such as through an audit reconsideration, a Tax Court petition, or a previous appeal, and did not take it. The IRS expects you to use the venue available at the time the dispute arose.

DATL vs. Doubt as to Collectibility: Why the Distinction Matters

Doubt as to Collectibility, the much more commonly used OIC type, asks the IRS to accept less than the full balance because you cannot reasonably pay it. That requires a full financial disclosure: income, expenses, assets, and a calculation called Reasonable Collection Potential.

DATL skips all of that. You are not arguing inability to pay. You are arguing the number itself is wrong. Because of this, DATL offers do not require Form 433-A or 433-B, the detailed financial statements that standard offers require. The application fee is also waived for DATL offers, and no initial payment is required at filing, which differs significantly from the standard OIC process.

How to File a DATL Offer in Compromise

1. File Form 656-L, the Offer in Compromise (Doubt as to Liability), instead of the standard Form 656
2. Provide a detailed written explanation of why the assessed liability is incorrect, supported by documentation
3. Include any evidence that supports your position: corrected income documents, court records, prior correspondence with the IRS, proof of identity theft, or anything establishing the assessment was wrong
4. Propose the amount you believe you owe, if any
5. Submit the offer to the IRS unit currently assigned to the liability, which may differ depending on whether the case is in Collections, Examination, or Appeals

Because DATL hinges entirely on the strength of your evidence and legal argument, this is one of the areas of IRS representation where the quality of the written case matters more than almost any other resolution type. A weak DATL submission with vague assertions gets rejected quickly. A well-documented one with a clear legal theory has a real chance.

What Are the Offer in Compromise Acceptance Rates?

The overall Offer in Compromise acceptance rate, across all three types combined, was approximately 14 percent in fiscal year 2025, based on the most recently published IRS Data Book. The IRS received 38,797 offers and accepted 5,464 of them, totaling 98.1 million dollars in settled liabilities.

That figure represents a sharp drop from prior years. In fiscal year 2023, the acceptance rate was roughly 42 percent, with 12,711 of 30,163 submitted offers accepted. Over the most recent ten-year period, the average acceptance rate across all OIC types sits closer to 37 percent.

The IRS Data Book does not break out DATL offers separately from Doubt as to Collectibility or Effective Tax Administration offers in its published acceptance statistics, so a DATL-specific acceptance rate is not publicly available. What is clear from the aggregate numbers is that the overall program has become significantly more selective in the most recent fiscal year, which makes the quality of the submission more important than ever.

Why the Acceptance Rate Dropped So Sharply

A acceptance rate falling from roughly 42 percent to roughly 14 percent in two years is a significant shift. While the IRS Data Book does not provide a single stated reason, several contributing factors are publicly documented: increased scrutiny on offer quality, continued staffing constraints affecting case processing, and a higher volume of submitted offers that did not meet basic eligibility requirements before they were filed.

The practical takeaway for taxpayers is the same regardless of the cause. An incomplete, poorly substantiated, or unrealistic offer is far less likely to succeed today than it was even two years ago. Professional preparation is not just helpful. It is close to necessary.

Best Use Cases for a DATL Offer

When DATL makes sense

• You have documentary proof the IRS assessment is factually wrong, not just unfair
• You never received the original audit or assessment notice and lost your chance to respond through normal channels
• The liability resulted from identity theft or fraudulent use of your information
• A Substitute for Return was filed by the IRS using only the income they had on record, without your actual deductions or correct filing status
• You can clearly show the tax should belong to someone else

When DATL is not the right tool

• You agree the liability is correct but cannot afford to pay it. That is Doubt as to Collectibility
• You already had a chance to dispute the liability through audit reconsideration, Appeals, or Tax Court and did not pursue it
• Your dispute is really about penalties, not the underlying tax. Penalty abatement is a separate and often faster process
• You do not have documentation to support your position. DATL is an evidence-driven process, not a negotiation based on circumstances

Frequently Asked Questions

What is the difference between DATL and a standard Offer in Compromise?

A standard Offer in Compromise, formally Doubt as to Collectibility, asks the IRS to accept less than the full balance because the taxpayer cannot pay it. DATL asks the IRS to reduce or eliminate the balance because the assessment itself is incorrect. One is about ability to pay. The other is about accuracy of the debt.

Do I need to submit financial information for a DATL offer?

No. DATL offers do not require Form 433-A or 433-B financial disclosure statements, since the offer is not based on your ability to pay. The application fee is also waived for DATL submissions.

What is the current Offer in Compromise acceptance rate?

Based on the most recently published IRS Data Book covering fiscal year 2025, the IRS accepted approximately 14 percent of all offers submitted across all three OIC types. That is down from roughly 42 percent in fiscal year 2023. The ten-year average sits closer to 37 percent.

Can I file a DATL offer if I already lost an audit?

Generally no, if you had a prior opportunity to dispute the liability and did not use it. DATL is intended for situations where the taxpayer did not have a previous chance to contest the assessment, such as a default judgment from a missed notice or a liability discovered after the original dispute window closed.

How long does the IRS take to process a DATL offer?

Processing times vary significantly based on case complexity and current IRS staffing levels, but DATL offers commonly take several months to over a year for a determination, particularly if the case requires review by the unit that handled the original assessment. There is no statutory deadline for the IRS to respond.

The Bottom Line

A DATL Offer in Compromise is one of the most underused tools in IRS resolution, largely because most taxpayers and even some practitioners default to thinking of an Offer in Compromise only in terms of financial hardship. If the real issue is that the IRS got the number wrong, DATL is the correct and often faster path, provided you have the documentation to support it.

With overall OIC acceptance rates falling in the most recent fiscal year, the quality of the case you present matters more than ever. A DATL offer built on a clear, well-documented legal argument stands a meaningfully better chance than a vague request for relief.