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Settle for Less Through IRS Offer-in-Compromise Program

If you have substantial tax debt and no ability to pay, you may be able to settle that debt for less than you owe. The Offer in Compromise (OIC) option is a consideration if you don’t have assets or income that would allow you to pay the tax debt. 

OICs are divided into three types:

Doubt as to Collectability – This type of OIC is the most common. It is an option if you owe back taxes and cannot pay them, even if you sold your assets and/or paid in installments within the IRS’s timeframe to collect (generally 10 years from the time of the tax assessment).

Doubt as to Liability – If you have a legitimate dispute about your tax liability, you can file Doubt as to Liability. You must be able to provide documentation supporting your claim. Often this filing results in a response from the IRS  that resembles an audit.

Effective Tax Administration – This type of OIC would apply if collection of the full liability would create economic hardship (as defined byTreasury Regulation 301.6343-1), or  exceptional circumstances exist that would make collection of the full liability detrimental to voluntary compliance.