Any mention of past due taxes or the Internal Revenue Service often invokes panic in people. However, such a panicked response need not occur. If you owe back taxes to the Internal Revenue Service, an "Offer in Compromise" provides a means by which your tax bill can be reduced.
There are primarily two types of Offers in Compromise. The first type is called a "Doubt as to Liability Offer in Compromise." Under this type, the taxpayer contests the validity of the tax owed by claiming that the tax should not have been assessed in the first place. For example, if the IRS disallows a deduction that actually should have been allowed, resulting in tax owed by the taxpayer, an Offer in Compromise under a Doubt as to Liability theory would be an effective tool to resolve the tax liability.