Settle Your Debt for Less (Offer in Compromise)

An offer in compromise is a proposal to settle your tax bill for less than the full amount due. You may be able to settle your bill for the following reasons:

  • You’re currently experiencing financial hardship and can show that you’re not able to pay the full amount you owe (doubtful collectibility).
  • Extenuating circumstances kept you from filing or paying your taxes on time (waiver of penalty).
  • You may not be liable for the amount assessed (doubtful liability).

If we accept your offer, we will remove any amounts waived from your bill. If the offer is not accepted, you must pay the entire balance owed. If you don’t qualify and can’t pay the full amount due, you may also set up a payment plan with us. 

Learn how to request a debt settlement below.

For additional information about your rights as a taxpayer, see our Taxpayer Bill of Rights.

Financial Hardship - Businesses (Doubtful Collectibility)

If you are currently experiencing financial hardship and believe you are unable to fully pay what you owe, you may request an offer in compromise for doubtful collectability.

To do so, complete and submit the doubtful collectibility package for businesses.

Before you fill out the application, use the IRS Offer in Compromise Pre-Qualifier to see if you may be eligible for financial hardship. We use this tool to determine eligibility.

Additional Information:

  • We require a non-refundable $50 fee with your application.
    • The fee may be waived under certain conditions. See the Doubtful Collectibility Package for details.
    • The fee is not applied to the balance owed
  • We will review your completed offer and send a written response within 60 days.
    • We will not consider your offer unless all currently due tax returns are filed and processed.
    • Incomplete applications or forms with missing documentation will be denied.
      • Required documents include:
        • A fully completed FIN B-1 Financial Statement for Businesses
        • Complete copies of the three most recent statements for each bank and investment account
      • See the Doubtful Collectibility Package for a complete list of required and recommended documents to include with your application.
  • If we accept your offer, you may pay it in full or make equal payments for up to 5 months. If you require more than 5 months for repayment, see payment plan options.
  • We will file a Memorandum of Lien while your offer is being considered. It will be released when the debt has been paid.

Mail your required forms and all supporting documentation to:

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

Financial Hardship - Individuals (Doubtful Collectibility)

If you are currently experiencing financial hardship and believe you are unable to fully pay what you owe, you may request an offer in compromise for doubtful collectability.

To do so, complete and submit the doubtful collectibility package for individuals.

Before you fill out the application, use the IRS Offer in Compromise Pre-Qualifier to see if you may be eligible for financial hardship. We use this tool to determine eligibility.

Additional Information:

  • We require a non-refundable $50 fee with your application.
    • The fee may be waived due to low income. See the Doubtful Collectibility Package for guidelines.
    • The fee is not applied to the balance owed.
  • We will review your completed offer and send a written response within 60 days.
    • We will not consider your offer unless all currently due tax returns are filed and processed.
    • Incomplete applications or forms with missing documentation will be denied. 
      • Required documents include
        • A fully completed FIN I-1 Financial Statement for Individuals
        • Complete copies of the three most recent statements for each bank, investment, and retirement account
      • See the Doubtful Collectibility Package for a complete list of required and recommended documents to include with your application.
  • If we accept your offer, you may pay it in full or make equal payments for up to 5 months. If you require more than 5 months for repayment, see payment plan options.
  • We will file a Memorandum of Lien while your offer is being considered. It will be released when the debt has been paid.

Mail your required forms and all supporting documentation to:

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

Extenuating Circumstances (Waiver of Penalty)

If extenuating circumstances kept you from filing your return or paying your tax on time, you can ask us to waive penalties.

Examples include fire, death, illness requiring hospitalization on or around the due date, flood or natural disaster, or other unusual situations. We generally do not waive penalties in cases of simple oversight, such as forgetting to mail a return.

If the penalties are $2000 or less
  • Write to us with the details of your case and include any documentation that supports your claim. 
  • Send your request to:
    Virginia Tax
    Office of Customer Services
    P.O. Box 1115
    Richmond, VA  23218-1115
If the penalties are over $2000
  • Request an offer in compromise for waiver of penalty by completing the appropriate form and including all required documentation:
  • Mail your required forms and all supporting documentation to:
    Tax Commissioner
    Virginia Department of Taxation
    PO Box 2475
    Richmond, Virginia 23218-2475
Doubtful Liability

If you believe you may not be liable for the amount owed, you may request an offer in compromise for doubtful liability.

To do so, complete the appropriate form and include all required documentation:

Mail your required forms and all supporting documentation to:
Tax Commissioner
Virginia Department of Taxation
PO Box 2475
Richmond, Virginia 23218-2475

For additional options if you believe your assessment is incorrect, see Administrative Appeals.