Offer in Compromise

• A common citizen tax-relief program is the offer in compromise, or OIC, which is an agreement between the IRS and a taxpayer that allows the taxpayer to pay less than what she owes due to special circumstances. In order to qualify, the taxpayer generally must demonstrate that she cannot pay the amount owed in full or through a payment plan.
  
  

Types of OICs

• The IRS will accept an offer in compromise only under three conditions. First, if there is a doubt as to collectibility, meaning it is uncertain whether the taxpayer could ever pay back the full amount owed during the statutory collection period. Second, the IRS may accept an OIC if there is doubt as to liability, meaning it is uncertain whether or not the amount owed is correct. This generally occurs in situations where the examiner misunderstood the law or the taxpayer has new evidence. Last, the IRS may accept an OIC in situations where it would be effective tax administration to do so because of exceptional circumstances. In this situation, the taxpayer must show that the collection would be unfair or would create economic hardship. Individuals who do not qualify for an OIC may still qualify for citizen tax relief through penalty abatement or innocent spouse relief.
  
  

Penalty Abatement

• Penalty abatement, which is available to anyone, can help taxpayers reduce the total sum they owe by having the interest and penalties waived or reduced. The IRS will waive or reduce penalties and interest if the taxpayer is experiencing hardship, the taxpayer can demonstrate that the IRS miscalculated, or for any other reasonable cause, such as a recent illness that prevented the taxpayer from filing on time.
  
  

Innocent Spouse

• A spouse may be entitled to tax relief from a joint tax return if his or her present or former spouse filed an erroneous tax return and under the circumstances it would be unfair to hold the spouse liable for the taxes owed. For example, it would be unfair to hold a housewife, who has no income, responsible for payment of the taxes owed from her husband's earnings.
  
  

How to Apply

• Contact the IRS or a tax professional to apply for citizen tax relief. The IRS website, http://www.irs.gov, has forms to help you get started.