You can settle your debt with the IRS for significantly less than what you originally owed by taking advantage of their Offer in Compromise program. This program allows taxpayers to settle with the IRS on tax debt that has been incorrectly assessed or for liabilities they can't afford to pay. The Internal Revenue Code, section 7122, states, "We will accept an Offer in Compromise when it is unlikely that we can collect the full amount owed, and the amount you offer reasonably reflects the collection potential..."
If you qualify for an Offer in Compromise, It's often possible to completely eliminate the taxes you owe - including any penalties and interest - at an enormous discount. There's no predetermined bottom limit that the IRS will accept to settle your debt, especially if your offer is completed to their specifications. If done correctly, your debt may be settled for as low as 5% to 15% of what you presently owe. The key is to determine the least amount that the IRS will accept from you before you make the offer.