What happens if taxpayers can’t pay the taxes the IRS says they owe? An “offer in compromise” (OIC) may allow them to settle their tax debts for less than full liability. It can be difficult to get an OIC accepted, but individuals are eligible to apply if they’ve filed all required tax returns, made required estimated tax payments and met other requirements. (Taxpayers in open bankruptcy proceedings aren’t eligible.) The IRS considers such factors as an individual’s ability to pay, income, expenses and asset equity. It generally accepts an OIC if the amount represents the most the tax agency believes it can expect to collect within a reasonable period of time.
