I am unable to pay my delinquent taxes. Will the IRS accept an offer in compromise?

The IRS may accept an Offer in Compromise (OIC) if you are unable to pay your delinquent taxes in full, but certain conditions and criteria must be met. The IRS evaluates OICs based on three primary grounds:

1. Doubt as to Collectibility: This applies if you do not have sufficient income or assets to pay the full amount of your tax liability. The IRS will consider an offer if it is unlikely that the tax can be collected in full and the amount offered reasonably reflects what the IRS could collect through other means.
2. Doubt as to Liability: This applies if there is a genuine dispute about the amount of tax owed or whether you owe the tax at all. If you believe that the assessed tax is incorrect, you can submit an OIC on this basis.
3. Effective Tax Administration: This applies if you can pay the full amount of the tax, but doing so would cause economic hardship or would be unfair or inequitable. The IRS may accept an offer to promote effective tax administration if collection of the full liability would cause you significant economic hardship.

To submit an OIC, you must use Form 656, Offer in Compromise, and include the required application fee and initial payment unless you qualify for a low-income exception. The submission must also be accompanied by a financial statement (Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses) to provide the IRS with detailed information about your financial situation.

The IRS has established guidelines and procedures for evaluating OICs, and an independent administrative review process is available if your offer is initially rejected. If the IRS does not reject your offer within 24 months, it is deemed accepted.

In summary, the IRS may accept an OIC if you meet the criteria for doubt as to collectibility, doubt as to liability, or effective tax administration, and you follow the proper submission procedures.

Sources:
Offers in Compromise: How Far Have We Come?
Rev. Proc. 2003-71
Publication 556
§ 7122. Compromises
§ 601.203. Offers in compromise.