An offer in compromise (OIC) is an agreement between a taxpayer and the IRS to settle a tax debt for less than the amount owed. One taxpayer had unpaid taxes of $39,713, partly due to withdrawals that he’d taken from his retirement plan, on which no federal tax was paid. He stated that he needed the withdrawals to maintain his family’s standard of living. After receiving a Notice of Federal Tax Lien, he proposed an OIC of $1,500 and asked to have the lien withdrawn. Based on a review of his overall finances, the IRS Settlement Officer rejected his OIC, stating it was “substantially below” his ability to pay and that a “reasonable cause for failure to pay did not exist.” (TC Memo 2019-92)