In some cases, you may be able to settle your tax debts for less than the full amount you owe. If you are not able to pay your full federal tax liability or if paying your full tax liability would create a hardship for you, the IRS may approve what is known as an “offer in compromise,” which indicates that the amount offered is the most the IRS can expect to collect within a reasonable amount of time. Your eligibility for an IRS tax debt settlement will depend on a number of factors, including your income and expenses. In some cases, debtors in California may also be able to settle their state tax debts with the California Franchise Tax Board and pay less than the total amount owed.