Offer in Compromise (Settle Your Bill for Less)

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:

  • Extenuating circumstances - A life event kept you from filing or paying your taxes on time. In these cases, we'll consider a penalty waiver.
    • If you’ve accrued penalties over $2,000, use our OIC penalty waiver process detailed below.
    • If your penalty is less than $2,000, you can request a penalty waiver through Customer Service. Find more details here.
  • Financial Hardship - You are currently experiencing financial hardship and can show that you are not able to pay the full amount you owe (doubtful collectibility).
  • Doubtful Liability - You think your bill is incorrect for a legal reason. For more routine matters, contact the phone number listed on your bill, or call Customer Service for a review.

How to request an offer in compromise

You must complete an offer in compromise form for us to evaluate your request.

  • Select your reason for requesting an offer in compromise below.
  • Follow the instructions provided and submit all required forms and supporting documentation.
  • We will not accept your offer if any required forms or documentation are missing.
Extenuating Circumstances/Life Event (Penalty Waiver)

Extenuating Circumstances/Life Event (Penalty Waiver)

If extenuating circumstances kept you from filing your return or paying your taxes on time, you can ask us to waive your 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.  
  • Complete the appropriate form and include all required supporting documentation as detailed on the form. We will not accept requests for waiver if we don’t receive all required documentation.
  • Mail your form and all supporting documentation to:

    Tax Commissioner 
    Virginia Department of Taxation 
    PO Box 2475 
    Richmond, Virginia 23218-2475
Financial Hardship (Doubtful Collectibility)

Financial Hardship (Doubtful Collectibility)

If you are currently experiencing financial hardship and can show that you are not financially able to pay the full amount you owe, you can request an offer in compromise for doubtful collectibility.

  • Before you fill out the form, consider using the IRS Offer in Compromise Pre-Qualifier to see if you’re eligible. We use this tool to help us determine eligibility. Note: even if the tool shows you should be able to pay your full liability, you can still request an offer in compromise to discuss your individual situation with us. To discuss your options, please call us at 804.367.8045.

To request an offer in compromise due to financial hardship:

  • Complete a Doubtful Collectibility Package, and include all required forms and supporting documents:
  • We require a $50 fee with your application, unless you qualify for a waiver as detailed on the application
  • Mail your required forms and all supporting documentation to:

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

What to expect:

  • We’ll 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. See the Doubtful Collectibility Package for a list of required and recommended documents to include with your application.
  • If we accept your offer, you can pay the new amount due in full or through a payment plan of up to 5 months.
  • We will file a Memorandum of Lien while your offer is being considered. It will be released when the debt has been paid. 

Temporarily delay collection activities

If the IRS has temporarily delayed your collection process (currently not collectible status), please call us at 804.367.8045 to discuss the impact on your collection status with Virginia Tax. 

Disputing for a Legal Reason (Doubtful Liability)

Disputing for a Legal Reason (Doubtful Liability)

Only submit an offer in compromise for doubtful liability if you are disputing a point of law. For routine matters, place contact the office that assessed the bill, or call Customer Service for an informal review.

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

Mail all 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.