Yes, you can reduce your tax debt with an Offer in Compromise (OIC)—but only if you meet the IRS’s strict qualifications. An OIC is essentially a deal between you and the IRS that allows you to settle your tax debt for less than the full amount owed. It’s meant for taxpayers who are genuinely unable to pay their full balance, even over time.

The IRS reviews your income, expenses, assets, and future earning potential before deciding if you qualify. If it looks like you can reasonably pay off the debt through monthly installments or a lump sum, your offer may be rejected. But if you’re in a tough spot financially, an OIC could be your lifeline to a fresh start.

You may qualify for an Offer in Compromise if:

• You’re experiencing serious financial hardship.
  
• You have limited assets and income.
  
• Paying the full amount would create an undue burden.
  
• You’ve filed all required tax returns and are up to date.
  

Keep in mind: submitting an OIC doesn’t automatically pause collections unless it’s accepted for processing. You’ll also need to stay compliant with all tax filings and payments for five years after acceptance—miss one, and your agreement could be voided.The application process is paperwork-heavy and technical, so it’s often best to work with a IRS tax attorney or tax professional who understands how to submit a realistic offer the IRS is likely to accept.