Offers in Compromise (OIC) are can be found in Internal Revenue Code section 7122. According to the IRS, an Offer in Compromise allows you to settle your tax debt for less than the full amount you owe. It is an option if you can't pay your full tax liability, or doing so creates a financial hardship. When considering an OIC, the IRS takes into acount your assets, income and expenses. OICs are accepted when the offered amount represents the highest amount the IRS can collect from you within a reasonable time period.
Properly submitted OICs must be given consideration by the IRS. The process involves completing IRS Forms 433 and 656, as well as submitting an application fee and initial payment with your application. It is important to realize that you do not have a legal right to receive an OIC. Rather, whether or not your OIC is accepted is soley at the discretion of the IRS. Because of this, it is highly recommended that you hire a professional to submit an offer that is likely to be accepted and to properly submit your application to the IRS.