An Offer in Compromise lets you settle for less than you owe. The IRS calculates your Reasonable Collection Potential. Home equity and retirement accounts count in that calculation. Retirement accounts are generally valued net of the income tax and any early withdrawal penalty you would owe to cash them out (IRM 5.8.5.10). Retirees should read how offers work on a fixed income.
The process takes 6-12 months. You submit Form 656 with financial disclosure, pay a $205 fee, and make proposed payments while pending. If accepted, the balance is forgiven.
Want to know if an OIC is realistic? Let me run the numbers.
General information, not legal advice. Reading this page does not create an attorney-client relationship. Tax rules and dollar thresholds change; confirm the current figures for your tax year before acting.