Settle IRS Debt for Less

Owe the IRS More Than You Can Pay? An Offer in Compromise Could Help

If you’re facing a tax bill that feels out of reach or if paying it in full would create a financial hardship, there may be a way forward. The IRS offers something called an Offer in Compromise (OIC), which allows eligible taxpayers to settle their debt for less than the full amount owed.

But not everyone qualifies, and scams are common. Here’s what you need to know before applying.

What Is an Offer in Compromise?

An Offer in Compromise is a formal agreement between a taxpayer and the IRS. It allows you to settle your tax debt for less than the total you owe if paying the full amount would be a serious financial burden. The IRS reviews your income, expenses, and assets to determine whether a compromise is in the best interest of both parties.

To apply, most people will need to submit a $205 application fee and an initial payment. Low-income taxpayers may qualify to have both waived.

Check If You’re Eligible

You can use your IRS Individual Online Account to:

Confirm your eligibility for an Offer in Compromise
Calculate a preliminary offer
Submit payments securely online

To avoid delays, review the Offer in Compromise Booklet (Form 656-B) before applying. It includes step-by-step instructions and all necessary forms.

Be Cautious of OIC Mills

Some companies aggressively advertise tax relief services and promise to settle your debt for pennies on the dollar. These OIC mills often charge steep fees even when it’s clear the taxpayer doesn’t qualify. That’s money you don’t need to spend.

If you’d like help applying, look for a licensed enrolled agent or credentialed accountant in your area. You can search the Directory of Federal Tax Return Preparers on IRS.gov to find a trusted professional.

What If You Don’t Qualify?

Not everyone will be approved for an Offer in Compromise. If you don’t qualify, the IRS still offers other forms of assistance like payment plans, temporary collection delays, and penalty relief for eligible taxpayers.

If you’re unsure where to start, check out the Offer in Compromise FAQs for more guidance.

Need Help?

Tax debt can be overwhelming but you don’t have to figure it out alone. Understanding your options and avoiding scams can save you time, money, and stress. If you’re not sure what steps to take next, consider reaching out to a reputable tax professional who meets IRS standards.

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