Can I settle my tax debt with IRS?

Yes, if you qualify you can settle your tax debt for less than the full amount owed. This program is called OIC offer in compromise. I am often asked what will the IRS take to settle my tax debt? There is extensive documentation required that determines your ability to pay, income, expenses, and equity in assets. The amount to offer comes from this information. The IRS determines the most they can expect to collect from you and see if your offer is adequate. Your offer won't be considered by IRS unless you are current with all filing and payment requirements or if you are in an open bankruptcy proceeding. While your offer is being evaluated collection activities are suspended  and the period of time IRS has to collect your tax debt is extended. If your offer is accepted your federal tax refund for the year the offer is accepted will be retained by IRS and applied to your tax debt. There is an application fee and down payment requirement for submitting an offer unless you meet the low income qualifications.You must file and pay your taxes for five years after an accepted offer or the offer will be revoked and the tax liability will be reinstated by IRS. These are some of the OIC provisions but certainly not all. Submitting an OIC isn't the simpliest of tasks but well worth the effort if you can settle you tax debt. The recent fresh start program from IRS to help taxpayers has raised the OIC acceptance rate and offers hope for taxpayers who can qualify to satisfy their tax debts for less than the full amount.