Can You Get the IRS to Reduce Your Tax Debt?

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Negotiating your tax debt downward is possible. But read on to see why it might be a struggle. 

So far this year, the IRS has issued more than $262 billion in tax refunds to filers who were owed money for the 2022 tax year. But what if you’re in the opposite situation? What if you owe the IRS money and you don’t have anywhere close to the sum you’re on the hook for in your savings account to hand over?

It’s not uncommon to come up short when you have a balance due to the IRS. And in some cases, you may even be able to convince the IRS to let you off the hook as far as some or all of your balance goes.

But most of the time, the IRS won’t dismiss your tax debt so easily. So if you’re going to try to get the IRS to reduce your tax debt, you need to know the rules.

Should you pursue an offer in compromise?

In some situations, the IRS will agree to a reduced tax payment when one is due if you pursue an offer in compromise. An offer in compromise has you offering to settle your tax debt for an amount that’s lower than what you owe.

The IRS may agree to an offer in compromise when the circumstances warrant it. But in many cases, an offer in compromise will ultimately be unsuccessful.

First, to even have the option for an offer in compromise, you’ll need to meet these criteria:

Be up to date on your tax returns and estimated tax paymentsNot be in the midst of bankruptcy proceedingsHave a valid tax extension on file if you’re applying for the current year

From there, the IRS may agree to an offer in compromise if it feels that your tax debt truly isn’t payable, or that it would constitute a major financial burden. But these points, too, are hard to hit.

The IRS is generally willing to sit tight and get its money over time. So proving that your tax debt isn’t payable at all isn’t so easy.

Now, if you’ve become disabled and are no longer able to work, you might fall into the category of having an unpayable tax debt. But otherwise, the IRS will generally ask you to just pay back what you owe over many years.

And to the second point of your tax bill constituting a major financial burden, the same thing applies. Since you can generally pay your tax debt over several years if that’s necessary, it’s very hard to make the case that paying your debt will put an unreasonable burden on you financially.

Don’t get your hopes up too much

In some cases, an offer in compromise may be feasible. But most taxpayers are not able to get their IRS debts reduced. If you think you have a good case, it pays to talk to an accountant or tax attorney and get their input. Otherwise, you may need to resign yourself to paying the IRS what you owe, even if you do so over a lengthy period of time.

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