Taxpayers who have a tax debt they cannot pay may be able to settle their tax debt for less than the full amount owed by making an Offer in Compromise.
Before applying for an Offer in Compromise, here are some things to know:
- In general, the IRS cannot accept a settlement offer if the taxpayer
can afford to pay what they owe. Taxpayers should first explore other
payment options. A payment plan is one possibility. Visit IRS.gov for
information on Payment Plans – Installment Agreements.
- A taxpayer must file all required tax returns first before the IRS
can consider a settlement offer. When applying for a settlement offer,
taxpayers may need to make an initial payment. The IRS will apply
submitted payments to reduce taxes owed.
- The IRS has an Offer in Compromise Pre-Qualifier tool
on IRS.gov. Taxpayers can find out if they meet the basic qualifying
requirements. The tool also provides an estimate of an acceptable offer
amount. The IRS makes a final decision on whether to accept the offer
based on the submitted application.
- Taxpayers wishing to file for an Offer in Compromise should visit IRS website’s Offer in Compromise page for more information. There taxpayers can find step-by-step instructions as well as the required forms. Taxpayers can download forms anytime at www.irs.gov/forms or call 800-TAX-FORM (800-829-3676) and ask for Form 656-B, Offer in Compromise booklet.
- Tax Topic 204- Offers in Compromise
- Offer in Compromise – English
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