Offer in Compromise
with the IRS

An Offer in Compromise (OIC) with the IRS is an agreement that allows taxpayers to settle their tax debt for less than the full amount owed. It's considered a viable option for individuals who cannot pay their full tax liability, or if doing so would create financial hardship, taking into account the taxpayer's ability to pay, income, expenses, and asset equity. The IRS typically approves an OIC when it represents the most the agency expects to collect within a reasonable period. Before applying, all other payment options should be explored, as the OIC program is not suitable for everyone​ (IRS.gov)​.

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To be eligible for an OIC, applicants must have filed all required tax returns, made all required estimated tax payments for the current year, not be in an open bankruptcy proceeding, and if applying for the current year, have a valid extension. Additionally, employers must have made tax deposits for the current and past two quarters before applying​ (IRS.gov)​.

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There are several reasons the IRS may accept an OIC: if there's doubt as to the liability of the tax debt; if there's doubt as to collectability, meaning the IRS believes the taxpayer's assets and income are insufficient to pay the full debt; or based on effective tax administration, where collecting the full amount would either create economic hardship for the taxpayer or would be unfair and inequitable due to exceptional circumstances​ (IRS.gov)​.