Do you owe the IRS taxes? The IRS accepts Offers of Compromise on taxes, penalties and interest due and owing. However, all tax returns must be filed before the IRS will consider an Offer of Compromise. There are three grounds for which the IRS will consider an Offer of Compromise: 1) Doubt as to Liability: This is only if you believe you do not owe the taxes; 2) Doubt as to Collectibility: This is if you have insufficient assets and income to pay the debt in full to the IRS. This is the most common ground, but everything must be disclosed to the IRS under oath concerning your assets, liabilities and income; and 3) Effective Tax Administration: This is if you have the assets to pay the taxes, but it would cause an economic hardship for you to pay the taxes in full. Generally, if the IRS accepts the Offer of Compromise, you have 90 days to pay the sum offered. There are certain installment agreements, but these are harder to obtain. You must pay a $150 fee to the IRS with the Offer of Compromise. If you are owed a refund of taxes by the IRS during the year they accept your Offer of Compromise, the IRS will keep this refund. As part of the Offer of Compromise, you are also agreeing with the IRS that you will file all tax returns on time for the next five years and pay all taxes due for the next five years. If you do not, the IRS can rescind the Offer of Compromise.