What is Offer In Compromise?

Legal Definition
The Offer in Compromise (or OIC) program, in the United States, is an Internal Revenue Service (IRS) program under 26 U.S.C. § 7122 which allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed to clear the debt. A taxpayer uses the checklist in the Form 656, Offer in Compromise, package to determine if the taxpayer is eligible for the offer in compromise program. The objective of the OIC program is to accept a compromise when acceptance is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements.
-- Wikipedia
Legal Definition
A taxpayer can pay an amount less than the amount owed for tax liabilities, under this agreement between the IRS and the taxpayer. This only comes into effect if the IRS gets sufficient evidence that the taxpayer will not have sufficient funds even after selling his assets, while taking into account his current and potential earnings.