If you are looking for a way to negotiate down a tax debt with the IRS, an Offer In Compromise may be a good option. It works much like you think it would form the name; You propose a certain amount of what you owe as what you can realistically pay, and if the IRS agrees with you, it may reduce what you owe to that amount you proposed. The IRS may consider an Offer in Compromise even if there is no dispute that the taxpayer owes the money.
Keep in mind that the IRS is not required to accept an offer that you submit. The IRS has many rules and requirements for when they will consider an OIC and for what amount they will settle. There are some unscrupulous businesses known as “OIC Mills” which charge people large fees for submitting OIC offers the business knows won’t be accepted, so be wary of claims that seem too good to be true.
To check for yourself whether the IRS would consider an Offer in Compromise in your case, you can check the Offer in Compromise Qualifier tool. While this tool can’t tell you whether the IRS will accept your offer, it can tell you whether it would consider one as applied to your case. The page also gives important information on how Offers in Compromise are submitted and what the offers need to show. If you determine you want to file an offer but need advice, many reputable tax preparers and attorneys offer help with OICs. MVLS may be able to help, if you qualify.
Written by LITC Director, John Hardt.