An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. The IRS will consider your unique set of facts and circumstances:

Ability to pay;
Income;
Expenses; and
Asset equity.

The IRS will generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. It is important to explore all other payment options before submitting an offer in compromise.

Make sure you are eligible

Before the IRS can consider your offer, you must be current with all filing and payment requirements. You are not eligible if you are in an open bankruptcy proceeding.