If you can't pay your full tax liability or doing so creates a financial hardship, an offer in compromise may be a legitimate option. However, it is not for everyone, and taxpayers should explore all other payment options before submitting an offer in compromise to the IRS. Taxpayers who can fully pay the liabilities through an installment agreement or other means generally won't qualify for an OIC.

To qualify for an OIC, the taxpayer must have:
Filed all tax returns.
Made all required estimated tax payments for the current year.
Made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.

Whether your offer in compromise is accepted depends on several factors; however, typically, an offer in compromise is accepted when the amount offered represents the most the IRS can expect to collect within a reasonable time frame - referred to as the reasonable collection potential (RCP). In most cases, the IRS won't accept an OIC unless the amount offered by a taxpayer is equal to or greater than the reasonable collection potential (RCP), which is how the IRS measures the taxpayer's ability to pay.

The RCP is defined as the value that can be realized from the taxpayer's assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income minus certain amounts allowed for basic living expenses.

The IRS may accept an OIC based on one of the following criteria:
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Doubt as to liability. An OIC meets this criterion only when there's a genuine dispute about the existence or amount of the correct tax debt under the law.
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Doubt as to collectibility. This refers to whether there is doubt that the amount owed is fully collectible such as when the taxpayer's assets and income are less than the full amount of the tax liability.
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Effective tax administration. This applies to cases where there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship - or would be unfair and inequitable because of exceptional circumstances.

When requesting an OIC from the IRS, use Form 656, Offer in Compromise, and also submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals. If you are applying as a business, use Form 433-B (OIC), Collection Information Statement for Businesses. A taxpayer submitting an OIC based on doubt as to liability must file additional forms as well.

Many students take on odd jobs such as babysitting or mowing lawns over the summer to make extra cash. If this is your child's situation, you should keep in mind that earnings are considered income from self-employment. If a student is self-employed, Social Security and Medicare taxes may still be due and are generally paid by the student.

If your child has net earnings of $400 or more from self-employment (see above), they also have to pay self-employment tax. Anyone with church employee income of $108.28 or more must also pay self-employment tax. This tax pays for benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed just as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages.

If your child participates in advanced training as an ROTC student and receives a subsistence allowance for food and lodging, it is generally not taxable. For example, active duty pay, pay received during a summer