If you have a tax debt, you may be able to settle your debt for less than the full amount that you owe. This is called an offer in compromise. The IRS will consider your situation if you cannot pay your debt or if doing so would create a significant financial hardship. The IRS will evaluate your ability to pay, your income, expenses and assets.
The IRS will approve an offer in compromise if you offer an amount that represents the most that they can expect to collect within a reasonable amount of time. You must look at all payment options before you submit an offer in compromise. Before the IRS will consider your offer, you must be current in your tax filing and payment requirements, and you will not be eligible if you are in an open bankruptcy proceeding. In order to submit your offer to the IRS, you will need to follow instructions and fill out the forms in the Offer in Compromise Booklet (Form 656-B).
You will need to make an application fee and initial payment with your offer application. This payment will be based on your offer and the payment option that you choose. However, if you meet the Low Income Certification guidelines, you will not have to send an application fee or an initial payment while the IRS evaluates your offer. The application package has all of the details.