In essence, you offer to pay the IRS a flat sum of money lump sum, installments in exchange for a release from the full amount of tax debt. Ordinarily, the IRS will not accept an offer unless it is clear that you have complied with all current filing and paying requirements. The acceptance of an offer creates a "fresh start"; therefore, the terms of the offer require future compliance with all tax filing and paying requirements for a period of 5 years. If you do not abide by all of the terms of the offer, including the compliance requirement, the IRS may reinstate the entire tax liability.
An offer may take several months to process, and will result in a more detailed examination of your personal situation and financial affairs. You may also be required to continue or begin monthly installment payments while the offer is pending if your current income is high enough. A final note: the filing and processing of an offer automatically extends the 10-year statute of limitations on collection.
For more information, see our section on "Tax Enforcement".