Compassion from the IRS ? No. But you can sort of negotiate by setting up a payment plan.
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Depending upon your financial circumstances right now, and over the past two years, you may qualify for settlement with the IRS under their offer in compromise program (form 656). An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship.
If you write a letter to the IRS, oftentimes you can get penalties abated. I have never seen the IRS abate interest. The Offer in Compromise is unlikely to be effective because you have enough equity in the mother-in-laws house to disallow an Offer in Compromise. With the vast amounts of medical,you may not owe as much as you fear.
It sounds like you all have had your hands full. I hope things are getting better. The IRS is not in the compassion business. They are governed by law and regulations that instruct them to collect, on behalf of the taxpayers, all assessed taxes. When you have a tax debt that you can't pay, there are various ways you can handle the debt. First, you can submit your financial data to a Revenue Officer and if that data shows that you can't pay your tax debt in any meaningtul way, they may classify you as "currently uncollectible". If the data show you can make payments, then they may impose a payment plan on you. Then as one of the other lawyers suggested, you could seek an abatement of the taxes due to your inability to pay the debt. That is called an"Offer in Compromise". Doing one of those is a very techinical, often frustrating process which many times only results in the IRS telling you that your offer is not sufficient and they peg the amount they would accept just out of your reach. You should consult a CPA, attorney or enrolled agent who is experienced with representing taxpayers before the Collection Division of the IRS. The actual plan your consultant recommends could be a blend of the above. The important thing is to get a dialogue going with the IRS. Bad things happen when the IRS thinks you are ingnoring them.
I agree with my colleagues that Offer in Compromise is probably not an available option in your circumstance and that negotiating a payment plan is a better option. If you want help, I can help you. I am both a C.P.A. and Attorney and am here in the Twin Cities. You can call me at 651-434-7590.
This answer does not create an attorney-client relationship.