An Offer In Compromise is when the IRS agrees to accept less than the amount the IRS has stated you owe. An offer in compromise can be paid in a lump sum or over a period of time. Some reasons the IRS will accept an offer in compromise is because there is a doubt as to collectability, a doubt as to liability, or effective tax administration – meaning you could afford to pay the full debt but it would create an economic hardship or be unfair or inequitable. When an Offer in Compromise is accepted, penalties and interest stop accruing. You are only liable to pay the amount agreed to over time.