Yes, if your circumstances fit. The IRS has the authority to cancel all or part of your tax debt and reach an agreement with you for less than you owe. This is called a compromise offer or OIC which is a part of the fresh start initiative. A transaction offer is an agreement between a taxpayer and the IRS that settles a tax debt for less than the total amount owed.
A transaction offer is an option when a taxpayer cannot fully pay their tax liability. It is also an option when paying the full tax bill would cause financial difficulties for the taxpayer. The goal is to achieve a commitment that meets the best interests of both the taxpayer and the agency. The best way to prevent interest from accruing is to pay the full tax bill.
But, if that's not possible, you have options. If you need more time to pay your tax bill, the IRS will likely give it to you in the form of a payment plan. A payment plan will allow you to pay your late tax bill (plus accrued interest and fees) in installments over a period of time. Something that was out of your control must have happened to you, such as an illness, you received bad tax advice from your CPA, or things of that nature, your records were burned in a fire.
Filing a tax return late and paying a tax bill late are two different things with two different types of penalties. If you have the money to pay the IRS, or you probably will in the future, no negotiation will convince the IRS to come to an agreement with less than you owe. Well, you must be able to prove that you didn't know or had no reason to know about the underpayment or non-payment of taxes. A transaction offer (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer's tax liabilities for less than the total amount owed.
It's temporary for the IRS to review your income annually to see if your financial situation has improved. And then, the third thing you also have to offer, in addition to your net capital in your absence, is the income that is left behind reasonable, which the IRS considers reasonable and reasonable living expenses multiplied by 12. For example, if you're a business owner and you withheld payroll taxes from your employees and didn't pay them, those won't be downloadable. You can use the Pledge Offer Prequalifier on the IRS website to determine if you are eligible and prepare a preliminary proposal. To determine if you qualify for tax relief through a transaction offer, the IRS considers your ability to pay, your income and expenses, and the amount you have in assets.
Individual taxpayers and business owners can use the recently updated commitment offer brochure (PDF) by the IRS to learn how a compromise offer works and decide if it could help them resolve their tax debt. And also like the set of non-collectibles today, since they review your financial information when you file your tax returns. However, in real life, it's not that easy to get the IRS to settle a tax debt for cents on the dollar. That fee may be higher than what you end up saving on your tax bill if the IRS accepts your transaction offer (and may not be refundable if the IRS rejects your offer).
A tax professional can help you evaluate which option will work best for you and work with the IRS to establish the agreement. You must request this delay in collection and the IRS may ask you to complete a collection information statement or a collection information statement form for employees and self-employed people to show that your finances are as bad as you say.