IRS Offer in Compromise

What this actually is

An offer in compromise settles a tax debt for less than the full amount, when you genuinely cannot pay it or paying would cause hardship. You apply yourself. The application fee is $205 (waivable on low income), and the IRS publishes a free Pre-Qualifier tool that tells you whether you are likely to qualify before you spend anything. ⚠️ This is the single most heavily monetised free thing in the tax system: the "settle your tax debt for pennies" adverts sell you help with a form you can file yourself. See the next entry — the IRS names the practice explicitly.

Who qualifies, and what trips people up

You must have filed all required returns, made all required estimated payments, not be in an open bankruptcy, and, if self-employed with employees, have made tax deposits for the current and prior two quarters. The unfiled-returns requirement is what stops most people — get current first. Most offers are rejected where the IRS calculates you can pay over time; an installment agreement or "currently not collectible" status is often the realistic outcome.