The IRS does agree to settle tax debts for less than the amount owed. It has this power.
The IRS’s offer in compromise or OIC program is one avenue for settling tax debts. There are three different types of settlement offers that taxpayers can make through the OIC program.
The IRS will generally entertain valid offers submitted through the OIC program. The IRS considers offers based on the “reasonable collection potential,” whether the tax liability is actually owed, and whether not collecting the tax debt will discourage other taxpayers from paying their taxes.
The IRS Office of Appeals also settles tax liabilities for less than the amount owed. This option typically comes up before the IRS assesses the tax in the first place. It can also come up if the taxpayer files a refund claim, requests an IRS audit reconsideration request, or submits a penalty abatement request. The IRS Office of Appeals considers offers based on the hazards of litigation. The IRS Office of Chief Counsel also has the authority to settle tax debts.
These are just a few of the options for settling tax debts with the IRS. There are a number of rules that apply to each option. These rules must be followed in order for the IRS to settle the tax debt. We can help with this. We advise taxpayers on how to settle tax debts daily.
Please contact us immediately if you have an unpaid IRS tax debt and would like to evaluate how to settle the tax debt.