TC 788: Offer in Compromise Conditions Completed

What the code actually does

TC 788 posts once the taxpayer pays the offer amount and meets any collateral agreement terms. IRS Document 6209, Section 8A (the IRS’s reference guide to its data-processing codes) describes it as recording "the closing of an accepted Offer-in-Compromise," after which "issuance of future OIC transcripts is discontinued." That closing is not the end of the offer: IRM 5.19.7.13.1 has the IRS input TC 788 when it moves a paid offer into compliance monitoring.

The condition it enforces is the interesting part: "to post, an unreversed TC 780 must be posted." The completion cannot exist without a standing acceptance. That single clause settles the question the numbering invites, and it is the reason this page exists rather than being a line on the acceptance page.

What this means for your refund

A TC 788 means you paid your accepted offer in compromise; Doc 6209 says the code releases the account "for offsetting and refunding insofar as pertains to OIC freeze," so the offer no longer holds refunds. The TC 780 interest restriction stays. File and pay on time for five years from acceptance, or the IRS can still cancel the offer.

It is not the reversal of the acceptance

Practitioners reasonably assume that a higher-numbered code in the same family undoes the lower one, because across most of the master file that is exactly how the numbering works — assessment and abatement, freeze and release. Here it does not.

An accepted offer is undone by default or termination, which are different codes entirely and which put the compromised liability back. This code does the opposite: TC 788 posts when the IRS moves a paid offer into compliance monitoring (IRM 5.19.7.13.1). It does not end the five-year compliance term, which runs five years from the acceptance date, and the IRS can still default the offer after TC 788 posts (IRM 5.19.7.15).

The distinction is worth getting right in front of a client, because the two outcomes could not be further apart. A posted TC 788 means the taxpayer paid the offer; a default is the beginning of collection on a liability the client believed was settled. Reading one as the other is the sort of error that changes what a practitioner does next by everything.

What survives the completion

Doc 6209 records that on completion the "account and Tax Module is released for offsetting and refunding insofar as pertains to OIC freeze" — so the refund and offset restrictions that came in with the acceptance come off, and the client’s account behaves normally again.

But one thing deliberately does not come off: "credit/debit interest restriction (and FTP on BMF) established from the posting of TC 780 are retained." The interest and failure-to-pay restrictions that stopped the compromised years from growing survive the TC 788 and stay unless the IRS later defaults the offer.

That is the correct outcome and worth understanding rather than being surprised by. Completing an offer does not retrospectively restore the interest the compromise extinguished; the restriction stays in place so the module (the record for one tax type and period) cannot start accruing again on a liability that no longer exists. A module that begins accruing after TC 788, with no default on the account, is showing a problem, not normal behavior.

What people mistake TC 788 for

People confuse it with TC 780, the acceptance. The gap between them covers paying the offer, not its five-year compliance window, which runs from the acceptance date and continues after TC 788 posts. Form 656-B, the Offer in Compromise booklet, sets the Periodic Payment option's own term much shorter: "the remaining balance paid in monthly payments within 6 to 24 months". The five-year clock is separate and applies to every payment option, except doubt-as-to-liability offers: "you must continue to timely file all required tax returns and timely pay all estimated tax payments and federal tax payments that become due in the future. If you fail to timely file and timely pay any tax obligations that become due within the five years after your offer acceptance we may default your offer." That five-year window is the thing to manage: until five years after acceptance the client has to stay compliant on every subsequent filing and payment obligation, long after the offer payments themselves are finished and TC 788 has posted, and it is the later years — the ones nobody was thinking about when the offer went in — that can break an accepted offer. A client who has just been accepted is nowhere near this code.

People confuse it with the pending code by clients relaying what they were told, and the TC 480 page covers why processability, acceptance and completion are three separate events with three separate codes. Where an offer is still being contemplated rather than monitored, the OIC pre-qualifier works the financial test the Service will apply.

People assume it posts automatically. IRM 5.19.7.5.3 shows manual input for offers not controlled on AOIC (Automated Offer in Compromise) — "input TC 788 using CC REQ77 with Delay Code 2 to allow TC 971/032 to post. Set a follow-up for 2 cycles to ensure TC 788 input on Masterfile" — and the chapter carries a whole subsection on correcting unpostable TC 788s on mirrored accounts. A client with a non-AOIC offer who has plainly paid the offer amount and met any collateral agreement, and whose account still shows no TC 788, has a plausible administrative problem worth raising, not a settled matter to leave alone.

What to do next

Confirm which code actually posted before telling a client where their offer stands — TC 788 means the client paid the offer and the IRS is monitoring compliance, while a default puts the compromised liability back.

Where the client has paid the offer amount and met any collateral agreement, and no TC 788 has appeared, treat it as an administrative gap and ask, since the IRM itself contemplates unpostables and manual follow-up here.

Check that the interest and failure-to-pay restrictions were retained, and query any module that starts accruing again.

Expect refund and offset behavior to return to normal at this point, and tell the client so.

Keep the client filing and paying on time until five years from acceptance, whatever the transcript shows; the IRS can still default the offer after TC 788 posts.

Watch subsequent-year filing and payment compliance as closely as the offer payments themselves, since that is what usually causes a default.

Read the whole sequence — pending, accepted, completed — in order with the IRS Transcript Decoder rather than from the client’s file.