Settling Your Tax Debts
The AI summary you get after a Google search about which debts you can and cannot discharge in bankruptcy will tell you that tax debts are among the most difficult debts to discharge. The easiest debts for a bankruptcy court to discharge are the ones owed to private lenders, such as credit card debts and medical bills. Meanwhile, the bankruptcy court has no authority to forgive amounts that you owe pursuant to orders by other civil or criminal courts. Your child support obligations, criminal fines, and judgments ordered by other courts will not budge even if you submit an airtight bankruptcy petition. Tax debts, like student loans, occupy an intermediate position. It is difficult, but not impossible, to get a bankruptcy court to forgive debts that you owe to the Internal Revenue Service (IRS). A more straightforward way to make tax debts disappear when you cannot pay them is to settle them directly with the IRS. For help strategizing about the best way to cope with tax obligations that you cannot pay, contact a Boca Raton debt lawyer.
How Does an Offer in Compromise Work for Tax Debt?
An offer in compromise (OIC) is an agreement between a taxpayer and the IRS, where the parties agree to settle the taxpayer’s obligations to the IRS for less than the taxpayer would ordinarily owe according to the IRS guidelines. You can qualify for an OIC if you do not have enough money to pay the IRS what you owe, or if paying the face value amount of your tax debt, even if you paid it in installments, would cause you undue financial hardship. To get an OIC, you must be honest on your tax returns and show evidence of your financial hardship, such as by providing information about your income and expenses.
An Understaffed IRS Makes It Harder for Financially Distressed Taxpayers to Settle Their Tax Debts
In 2025, more than 38,000 taxpayers nationwide applied for OIC. This represents a 29 percent increase from the previous year; this should not surprise anyone who has witnessed the financial distress that most American households are experiencing these days. The more disturbing news is that the number of OIC applications that have been approved is less than half the number of OIC application approvals last year. This is not just a case of Uncle Sam being greedy. Rather, it is largely due to staff cuts at the IRS. An understaffed IRS cannot manage as many OICs, so it can only approve the ones where the borrowers are in the greatest distress. If you have applied for an OIC or are considering applying for one, it is a good idea to also meet with a debt lawyer to discuss backup plans.
Work With a Debt Lawyer About Getting Out of Tax Debt
A South Florida debt lawyer can help you resolve your indebtedness to the IRS by applying for an OIC or by settling other debts to free up funds to pay the IRS what you owe them. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.
Source:
cnbc.com/2026/09/18/irs-offers-in-compromise.html
