An offer in compromise (OIC) is a proposal to settle your tax bill for less than the full amount due.

We can consider offers in compromise from individuals and businesses for the following reasons:

  • You are currently experiencing financial hardship, and can show that you are not able to pay the full amount you owe (doubtful collectibility)
  • Extenuating circumstances kept you from filing or paying your taxes on time, and you've accrued penalties over $2,000 (waiver of penalty).
    (For penalty amounts less than $2,000, you can request a penalty waiver through Customer Service. Find more details here.)
  • You may not be liable for the amount assessed (doubtful liability)

Financial Hardship (Doubtful Collectibility)

If you are experiencing a serious financial hardship and cannot afford to pay the full amount you owe, you may be eligible for an Offer in Compromise due to doubtful collectibility.

An Offer in Compromise is meant to help taxpayers who truly cannot pay their tax debt because of financial hardship. This option is not right for everyone, so it’s important to review your situation carefully before applying.

An Offer in Compromise may be right for you if you:

  • Are low income and struggling to pay basic living expenses
  • Have experienced a catastrophic event, or extenuating circumstances such as a fire or flood that’s caused financial hardship
  • Are struggling to pay your bills because of serious health problems, such as a long-term illness
  • Agree that you owe the amount due and are not challenging the debt

If one or more of these situations apply, you must be able to prove your hardship by providing supporting documents with your application that explain your circumstances, including all required financial records.

If you are unsure whether an Offer in Compromise is right for you, please call us at 804.367.8045 to discuss your options. 

How to Request an Offer in Compromise for Financial Hardship
  • Complete the following forms and include all supporting documents:
  • Include a $50 non-refundable application fee, unless you qualify for a fee waiver 
    (see the application form for details).
  • Mail your completed forms and all supporting documents to:

    Virginia Department of Taxation 
    PO Box 2475 
    Richmond, Virginia 23218-2475 
What to Expect After You Apply
  • We will review your application and send you a written response within 90 days.
  • All required tax returns must be filed and processed before we can review your offer. If you are due a refund, we’ll apply the refund amount to your outstanding debt to reduce the amount you owe.  
  • Applications that are missing forms or documents will be denied. Please review the application checklist carefully.
  • If your offer is accepted, you may:
    • Pay the new amount in full, or
    • Set up a payment plan for up to 5 months
  • A Memorandum of Lien will be filed while your offer is under review. It will be released once the debt is paid. 
Temporary Delay of Collection Activity

If you have Currently Not Collectible (CNC) status with the IRS, visit Temporary Delay of Collection Activity (Currently Not Collectible) for information on how to apply for Virginia CNC status.  

 

Doubtful Liability  

For requests for relief based on doubtful liability or for waiver of penalty, submit the required forms, and include all required documentation as detailed in the instructions:

You may be required to include a $50 administrative fee. See the instructions for details.

Mail your required forms and all supporting documentation to:

Tax Commissioner 
Virginia Department of Taxation 
PO Box 2475 
Richmond, Virginia 23218-2475

We will consider your offer based on all available information. If the Tax Commissioner accepts your offer, we will remove any amounts waived from your bill. If your offer is not accepted, you must pay the balance of the bill in full.

See the Taxpayer Bill of Rights for more information.