Yes. The IRS allows taxpayers to present an Offer In Compromise which allows a taxpayer to settle tax debt for less than the full amount owed. The IRS has three different approaches for settlement: (i) Doubt as to Collectability – A doubt as to collectability OIC is used when you are not disputing the amount of the tax debt that is owed. Instead, you are simply showing that based on your current financial situation or reasonable collection potential that you do not have the means to pay back the tax debt. In essence, the net equity in your assets combined with monthly disposable income will not yield sufficient income to pay the IRS in full within the 10-year statute of limitations for collection; (ii) Doubt as to Liability – This exists when there is an actual dispute as to whether the amount of the tax debt owed is correct or if the tax debt should have been assessed at all. In addition, there must be supporting evidence to create that doubt. Specifically, the evidence presented must alter the IRS’ viewpoint on whether they made the correct assessment; (iii) Effective Tax Administration-Hardship - Offers in compromise to promote effective tax administration are utilized when factors supporting (but not conclusive of) a determination that collection would cause the taxpayer significant economic hardship. Now, in layman’s terms this is stating ETA OICs are available when it would be inequitable for the taxpayer to pay the taxes because doing so would create a further economic hardship. ETA OICs can also encompass cases regarding non-economic hardship factors like public policy and equity factors. In order to qualify under these circumstances there are certain factors that must be met.
The taxpayer must have remained in compliance since the liability was incurred.
The taxpayer must have acted reasonably and responsibly during the situation that caused the tax debt.
If the tax debt is compromised the taxpayer will not be in a better position than if they had timely and fully met their obligations, unless special circumstances justify the compromise.
Please note that Oregon only has one form of OIC which is Doubt as to Collectability. They do not recognize Doubt as to Liability or Hardship.