Washington DC Tax Relief: Payment Plans, OIC & Appeals

Washington, D.C. Tax Relief Overview

Owing Washington, D.C. taxes is different from owing the IRS. The DC Office of Tax and Revenue (OTR), within the Office of the Chief Financial Officer (OCFO), administers a unique combined state-local tax system. Washington, D.C. is not a state — it combines what would be state and local taxes elsewhere into a single DC tax return. Federal tax relief strategies do not automatically apply to DC tax debt.

Unlike some states, Washington, D.C. does have an Offer in Compromise (OIC) program — giving eligible taxpayers a path to settle for less than the full amount. Depending on your situation, you may need one or more of the following:

An Offer in Compromise to settle for less than you owe (Form OTR-10); a payment plan (installment agreement) to pay over time; an appeal if you received an assessment you disagree with; penalty relief if penalties make the balance impossible to pay; lien release or levy resolution if collection action has started; or filing help if you have unfiled DC tax returns.

If you run a business in DC and owe sales tax, withholding tax, or business franchise tax, the stakes are higher. DC imposes personal liability on officers, directors, and partners for unpaid trust fund taxes under DC Code § 47-4491.

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Washington, D.C. Tax Relief Options at a Glance

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What DC Tax Notice Did You Receive?

Select your notice type for a quick explanation of what it means and your options.

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What the DC Office of Tax and Revenue Can Do to Collect

If you owe Washington, D.C. taxes and do not address the balance, OTR has a range of collection tools. Not every case reaches the most serious actions, but the longer a balance goes unpaid, the more options the District may use.

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Washington, D.C. Tax Payment Plans

If you cannot pay your Washington, D.C. tax balance in full, a payment plan (installment agreement) may be an option. DC payment plans are extended as a courtesy by OTR — they are not legally required. DC offers both self-service online plans and extended plans requiring financial documentation.

Important: Automatic Lien Filing on Payment Plans

If your balance is $25,000 or more, OTR automatically files a tax lien. If your balance is under $25,000, a lien is still filed if the payment plan exceeds 12 months. The lien remains until the liability is paid in full.

Self-Service Payment Plan (Online via MyTax.DC.gov)

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Extended Payment Plan (Over $100,000 or Over 24 Months)

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Key Terms for All DC Payment Plans

• Current Filing — all tax returns must be filed, and current taxes paid timely, while the plan is in effect
• Interest — interest continues to accrue on the unpaid balance during the plan
• Refund Interception — DC and federal tax refunds are subject to interception even during a payment plan.
• Payment Application — payments are applied to the oldest period first
• Statute Extension — taxpayer agrees to extend the statute of limitations for collection until final payment
• Default Causes — failure to provide financial info when requested; late or missed payment; failure to file future returns; new liability incurred.

Source: OTR Installment Agreements. Approval is discretionary. No guarantee of approval.

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Which Washington, D.C. Tax Relief Option Fits Your Situation?

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Washington, D.C. Offer in Compromise (Form OTR-10)

Yes — Washington, D.C. has an Offer in Compromise (OIC) program. Unlike many states, the DC Office of Tax and Revenue allows eligible taxpayers to settle tax debt for less than the full amount owed. The program is authorized under DC Code § 47-4404.

Types of DC Offers in Compromise

Doubt as to Collectability — you cannot pay the full amount because your income and assets are insufficient. These cases are worked by OTR Revenue Officers and typically require a substantial down payment with minimal time to meet the terms.

Doubt as to Liability — you dispute the amount of tax assessed. These cases are worked by OTR Auditors. You must have a legitimate basis to believe the assessment is incorrect.

What OTR Considers

Current and future earnings potential; completed PA-1 and/or PA-2 financial documentation; prior compliance history; tax type; and other relevant factors.

Key Requirements and Restrictions

• Form OTR-10 Booklet must be completed and submitted to OTR at 1101 4th Street SW, Suite 270W, Washington, DC 20024
• Financial documentation required (PA-1 for individuals and/or PA-2 for businesses)
• An OIC is NOT an appeal of the underlying liability
• OTR generally will not accept if you can pay in full via installment agreement or lump sum
• You must remain in compliance for 5 years after acceptance or the OIC defaults to pre-OIC status
• Taxpayers in active OIC are ineligible for a self-service installment agreement online

Source: OTR Offer in Compromise

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Washington, D.C. Penalty Relief

Penalty relief is different from a payment plan. A payment plan lets you pay over time. Penalty relief asks OTR to reduce or remove penalties when allowed under DC law.

Under DC Code § 47-4221, penalties shall not be imposed if the taxpayer shows reasonable cause and acted in good faith. Reasonable cause generally exists if, based on all facts and circumstances, the taxpayer exercised ordinary business care and prudence but was unable to comply.

Penalties That May Be Waived

Accuracy-related penalty (DC Code § 47-4211); failure to pay penalty (DC Code § 47-4213); failure to file penalty (DC Code § 47-4213); return preparer penalties (DC Code § 47-4217); personal liability / responsible officer penalty (DC Code § 47-4491); and failure to record timely a deed (DC Code § 47-1433).

How to Request Penalty Relief

Submit a written request to OTR Collection and Enforcement Administration; outline your reasonable cause basis with supporting documentation; OTR responds within 30 calendar days; if denied, you may request reconsideration within 30 days; reconsideration decision within 120 days; if still denied, appeal to the OTR Office of the Taxpayer Advocate (OTA).

Interest Abatement

Under DC Code § 47-4222, OTR may abate tax, interest, and penalty in certain limited circumstances. This is separate from penalty relief and is granted only in specific situations.

Penalty Relief vs. Payment Plan

A penalty waiver and a payment plan are separate processes. A payment plan does not automatically remove penalties. Penalty relief must be requested separately and approved based on reasonable cause. Even if penalties are waived, the underlying tax and interest must still be paid.

Source: OTR Collections FAQ | DC Code § 47-4221

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Washington, D.C. Tax Appeals

Washington, D.C., taxpayers have two independent paths to appeal a proposed tax assessment. You must choose one — you cannot appeal to both. Additionally, the OTR Office of the Taxpayer Advocate (OTA) can help with collection disputes after you have exhausted normal channels.

Path 1: DC Office of Administrative Hearings (OAH)

• Deadline: 30 calendar days from the date of the Notice of Proposed Assessment
• Payment required: NO — appeal to OAH does NOT require payment
• Exclusive jurisdiction: OAH has exclusive jurisdiction once elected; you waive the Superior Court
• Form: OAH's Taxpayer's Protest of a Proposed Assessment form
• Copy to OTR: Protest must also be sent to OTR
• Final appeal: DC Court of Appeals (from final OAH order)
• Contact OAH: 441 Fourth Street NW, Suite 450N, Washington, DC 20001 | (202) 442-9094 | oah.dc.gov

Path 2: DC Superior Court

• Deadline: Within 6 months from the date of assessment
• Payment required: YES — full payment of assessed tax, penalty, and interest required before appeal
• Judicial review: Full court proceeding with legal representation

30-Day OAH Deadline

The OAH appeal deadline is 30 days from the date of the Notice of Proposed Assessment. Missing this deadline can severely limit your ability to challenge the assessment. Do not wait.

Pre-Assessment Conference (Optional)

Before the assessment becomes final, you may request an informal conference with the OTR Audit Division. This is optional and NOT a precondition to appealing to OAH or Superior Court.

OTR Office of the Taxpayer Advocate (OTA)

The OTA is an independent unit within OTR that ensures fair and equitable treatment. OTA intervenes when a taxpayer has tried to resolve through normal channels without success. You can submit a Taxpayer Advocacy Request online via MyTax.DC.gov or email taxpayeradvocate@dc.gov.

Collection Appeals

If you disagree with a Collection and Enforcement Administration (CEA) decision — such as denial of penalty/interest waiver, rejection of an OIC, or objection to refund intercept — you can: file a written protest to CEA within 30 days; CEA responds within 30 calendar days; if denied, request reconsideration within 30 days; CEA reconsideration decision within 120 days; if denied, appeal to the OTR Office of the Taxpayer Advocate (OTA) via MyTax.DC.gov. Alternatively, you may appeal to the DC Superior Court within 6 months (full payment required).

Jeopardy Assessment Appeals

For jeopardy assessments, you have 5 business days to protest to OAH. If a timely protest is filed, seized property cannot be sold until OAH proceedings are completed.

Source: OTR Appeals | DC OAH

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Washington D.C. Tax Liens

A tax lien is a public claim filed by the District against your property. Under DC Code § 47-4421, when a person liable to pay tax neglects or refuses to pay after demand, the amount (tax + interest + penalties + costs) becomes a lien in favor of DC on all property (real and personal) belonging to the person. The lien has the same effect as a lien created by a judgment and attaches to property acquired during the lien period.

How DC Tax Liens Work

• Filing — tax liens are filed with the DC Recorder of Deeds, typically within 10 days after Notice of Tax Due and demand for payment
• Duration — the lien continues until the liability is satisfied or becomes unenforceable (under DC Code § 47-4422)
• Collection Statute — 10 years from assessment (DC Code § 47-4302), may be extended by written consent.
• Scope — attaches to all property belonging to or acquired by the person during the lien period.
• Automatic Lien on Payment Plans — filed automatically if balance is $25,000+ or plan exceeds 12 months.
• Credit Impact — can affect credit rating, ability to borrow, and ability to sell real estate.
• Release — lien released when tax liability is paid in full; taxes due are paid from sale proceeds when property is sold.

Source: OTR Enforcement Actions | DC Code § 47-4421

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Washington, D.C. Bank Levy

A bank levy allows DC to freeze and take funds from your bank account to satisfy a tax debt. Under DC Code § 47-4471(d)(4), no advance notice is required for a levy on accounts at third-party financial institutions. This can create immediate cash-flow problems, especially if the account is used for daily expenses or business operations.

Key Facts About DC Bank Levies

No advance notice required for bank account levies (DC Code § 47-4471(d)(4)); the levy extends to all property including rights to property, and the full account balance up to the tax liability may be seized; business bank accounts are not exempt from levy; if the first levy is insufficient, OTR may levy on other property until fully paid; if collection is in jeopardy, levy can proceed without the normal 10-day waiting period; an amount sufficient to cover levy expenses is added to the tax due.

Bank Levy Warning: Unlike wage garnishment, DC bank levies require no advance notice. Your account can be frozen without warning. Acting quickly after a levy is discovered may help in certain cases. The levy is released only when the liability is paid in full.

Source: OTR Enforcement Actions | DC Code § 47-4471

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Washington, D.C. Wage Garnishment for Tax Debt

Wage garnishment means DC can take money directly from your paycheck to pay your tax debt. Under DC Code § 47-4471(e), DC wage garnishment is continuous from the first levy until released by OTR.

How DC Wage Garnishment Works

• 30-day notice — a written notice of intention to levy is required before garnishment begins (in person, left at dwelling/business, or mailed)
• Continuous — garnishment continues from the first levy until released by OTR (DC Code § 47-4471(e))
• Service — notice of levy is served on your employer, who must comply with the law
• Applies to — salary, wages, bonuses, commissions, and any other compensation
• Release — levy is released when the liability is paid in full.

Wage Garnishment vs. Bank Levy

Source: OTR Enforcement Actions

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Washington, D.C. Unfiled Tax Returns

If you have not filed DC tax returns for one or more years, that can block most resolution options. OTR may estimate your tax and issue assessments based on those estimates — sometimes higher than what you actually owe.

Filing accurate returns can sometimes reduce an incorrect balance. But do not rush or file bad returns. It's better to prepare returns correctly with the right income, deductions, and DC credits.

Why Filing Matters

Unfiled returns block payment plan eligibility; OTR may issue substitute returns with higher tax than you actually owe; penalty relief generally requires all returns to be filed; the 10-year collection statute is measured from assessment, which requires a filed return; and OIC eligibility requires all returns to be filed.

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Washington, D.C. Business, Sales Tax, and Payroll Tax Debt

Business tax debt is a higher risk than individual income tax debt in DC. Sales tax (6.0% general rate), income withholding tax, and business franchise taxes are trust fund taxes — money you collected or withheld that belongs to the District. OTR takes these very seriously.

Responsible Person Warning: 100% Personal Liability

Under DC Code § 47-4491, any officer, director, or partner of a corporation or partnership can be held personally liable for unpaid trust fund taxes (sales tax and withholding tax). The penalty equals the full amount of tax, interest, and penalties not collected or paid.

Who Can Be Held Liable?

Officer or director of a corporation; general partner of a partnership; or similar principal of a business (bookkeepers, accountants, etc.).

Key Points

Multiple officers can be assessed; each who pays can recover a proportionate share from others. The Mayor must notify the responsible person in writing at least 30 days before imposing the penalty (unless collection is in jeopardy). A reasonable cause argument may be available. Unpaid honorary board members of tax-exempt organizations may be exempt if they meet criteria (solely honorary, no day-to-day participation, no actual knowledge). Certificate of Clean Hands may be denied, blocking other DC business activities.

DC Sales Tax

The general DC sales and use tax rate is 6.0% (increasing to 7.0% for periods beginning October 1, 2026). Vendors must register using Form FR-500 before making taxable sales. OTR may revoke a sales tax certificate in lieu of full seizure, which prohibits conducting sales in DC until tax issues are resolved and may trigger revocation of other DC licenses under the Clean Hands Act.

DC Withholding Tax

Employers must withhold DC income tax from employee wages. Monthly deposits are due by the 20th of each month for tax withheld in the previous month. Quarterly returns (Form FR-900Q) are due April 30, July 31, October 31, and January 31. The same responsible person rule under DC Code § 47-4491 applies to unpaid withholding taxes.

Source: OTR Enforcement Actions | DC Code § 47-4491

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DC Collection Statute of Limitations

Under DC Code § 47-4302, the DC Office of Tax and Revenue has 10 years from the date of assessment to collect tax debt through levy or court proceeding. This period may be extended by a written consent agreement between the Mayor and the taxpayer before the statute expires.

• General period: 10 years from assessment
• Extension: May be extended by a written consent agreement
• Methods: Levy or court proceeding
• Lien period: Continues until liability is satisfied or becomes unenforceable

Interest and penalties continue to accrue during the entire collection period. A payment plan typically requires the taxpayer to agree to extend the statute until the final payment is made.

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Washington DC Tax Relief Tools & Calculators

Use our DC calculators to estimate penalties, interest, or garnishment risk. Then request a review if the numbers show the balance is growing or collection is already active.

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Washington, D.C. Government Resources

These are the official DC sources for tax information, payment plans, appeals, and rules. Always check the official source for the most current information.

• DC Office of Tax and Revenue (OTR) — Official tax agency portal
• MyTax.DC.gov — Online account portal for DC taxpayers
• OTR Installment Agreements — Official payment plan guidance
• OTR Payment Options — All DC payment methods
• OTR Offer in Compromise — OIC program details and Form OTR-10
• OTR Enforcement Actions — Liens, levies, and garnishment rules
• OTR Appeals — Appeal process and deadlines
• OTR Office of the Taxpayer Advocate — Independent taxpayer assistance
• OTR Reconsideration Process — How to request reconsideration
• OTR Collections FAQ — Common questions about collections
• DC Office of Administrative Hearings — Independent appeals body
• DC Code Title 47 (Taxation) — Complete DC tax laws

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Not Sure What to Do With Your DC Tax Situation?

Select the card that matches your situation to jump to the relevant section.

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Frequently Asked Questions About DC Property Tax Relief and Tax Credits

Does DC offer property tax relief for homeowners and renters?

Yes. The DC Office of Tax and Revenue offers the Homeowner and Renter Property Tax Credit, known as Schedule H, to help homeowners and renters offset real property tax costs. For tax year 2025, the maximum credit is $1,425. The credit amount depends on how much property tax or rent you paid compared to your household income. You can claim it when filing your DC individual income tax return, or file the Schedule H form on its own if you are not otherwise required to file a DC return.

Who qualifies for the DC Homeowner and Renter Property Tax Credit?

To qualify for tax year 2025, your federal adjusted gross income must be $66,000 or less, or $90,000 or less if you are 70 or older. You must have lived in DC for the full year, in a home or apartment subject to real property tax, and you cannot be claimed as a dependent on someone else's income tax return (unless you turned 65 by the end of the tax year). Household income limits and eligibility details are set annually by the Office of Tax and Revenue, so confirm the current-year figures before filing.

What is the DC Earned Income Tax Credit, and how much is it worth?

The DC Earned Income Tax Credit (DC EITC) is a refundable credit for low- and moderate-income workers, separate from the federal Earned Income Tax Credit administered by the Internal Revenue Service. For tax year 2025, the DC EITC matches 100% of the federal credit amount, one of the highest match rates among state and local EITCs nationwide. Because DC's tax credit programs have changed through emergency legislation in recent budget cycles, confirm the current match rate on MyTax.DC.gov before filing.

Does DC have a Child Tax Credit?

DC enacted a local Child Tax Credit intended to provide up to $1,000 per qualifying child under 18, fully refundable, starting with tax year 2026 returns. However, this credit has undergone several legislative changes — it was repealed, restored through emergency legislation, and then partially affected by a congressional review action in early 2026. Because the status has shifted more than once in a short period, confirm the current rules directly with the DC Office of Tax and Revenue or a qualified tax preparer before relying on this credit in your planning.

Is there property tax relief for DC senior citizens or disabled homeowners?

Yes. The Senior Citizen or Disabled Property Owner tax relief program reduces qualifying property owners' real property tax by 50%. To qualify, you generally must be 65 or older (or certified as permanently and totally disabled by the Social Security Administration), own at least 50% of the property, live in it as your principal residence, and meet a household income limit that is adjusted each tax year. This program is separate from, and can be combined with, other property tax relief such as Schedule H and the Homestead Deduction.

What is the DC Homestead Deduction?

The Homestead Deduction is a real property tax exemption available to owner-occupants of DC residential property. It reduces your property's assessed value before your tax bill is calculated, lowering the amount of real property tax you pay each year. To qualify, the property must be your principal residence (you must be domiciled in the District), contain no more than five dwelling units, and have an approved application on file with the Office of Tax and Revenue. Once approved, the deduction continues automatically in future tax years as long as you remain eligible.

Where can I get free tax preparation help in DC?

DC residents with low or moderate income can get free tax preparation and filing help through Volunteer Income Tax Assistance (VITA) sites and organizations like Community Tax Aid, which operate during tax season (typically February through April). These free tax prep services can help you file your DC individual income tax return, claim credits like Schedule H and the EITC, and make sure your return is complete before submitting it to the Office of Tax and Revenue. This is a separate resource from paid tax preparers, though both can help you claim credits you're entitled to.

What is the deadline to file my DC individual income tax return?

The deadline to file a DC individual income tax return generally follows the federal deadline of April 15. If you need more time, DC allows filing extensions, though any tax owed is still due by the original deadline to avoid interest and penalties. Confirm the exact deadline for the current tax year on MyTax.DC.gov, since DC's filing deadline can shift in years when the federal deadline changes.

Do I need to file a full DC tax return to claim the Schedule H credit?

No. If you are not otherwise required to file a DC individual income tax return because your income is below the filing threshold, you can still file Schedule H by itself as a standalone form to claim the property tax credit. If you are filing a full DC income tax return, you must submit Schedule H along with it. Either way, the credit is refundable, meaning you can receive it even if you owe no DC income tax.

Are there tax breaks for first-time homebuyers in DC?

Yes. DC offers a reduced recordation tax rate for eligible first-time homebuyers, which lowers the transfer-related tax due when your deed is recorded with the Recorder of Deeds. Eligibility depends on the purchase price of the home falling under an annually adjusted cap and meeting household income restrictions. Because these thresholds are updated for each tax year, confirm the current purchase price cap and income limits before closing.

What counts as household income for DC property tax relief programs?

For programs like Schedule H and the Senior Citizen or Disabled Property Owner tax relief, "household income" generally means the combined current income of all household members living in the property, not just the applicant's income. This differs from adjusted gross income reported on an individual income tax return. Some dependents' income may be excluded under certain programs. Review the specific instructions for each program, since income restrictions vary between Schedule H, the Homestead Deduction, and senior/disabled property tax relief.

Who is considered "domiciled in the District" for DC tax purposes?

You are generally considered domiciled in the District if DC is your permanent legal home — the place you intend to return to even when temporarily away. This matters for DC individual income tax filing requirements and for property tax relief programs like the Homestead Deduction, which requires the property to be your principal residence. Domicile is different from simply owning property in DC; a person can own DC real property without being domiciled there.

Can I get help if I'm not sure which DC tax credits I qualify for?

Yes. Free and low-cost tax assistance is available through DC government resources, VITA sites, and legal aid organizations that specialize in DC tax credits for low- and moderate-income residents. A tax preparer or VITA volunteer can review your household income, filing status, and property tax payments to determine which credits — such as Schedule H, the DC EITC, or senior/disabled property tax relief — you may qualify for, and help you file the correct forms with the Office of Tax and Revenue.

Sources Used

These are the official government sources used for this page. Always check the current official source for the most up-to-date information.

• DC Office of Tax and Revenue (OTR) — Official Portal: otr.cfo.dc.gov ↗
• DC Office of Tax and Revenue — Installment Agreements: otr.cfo.dc.gov/page/installment-agreements ↗
• DC Office of Tax and Revenue — Payment Options: otr.cfo.dc.gov/page/payment-options ↗
• DC Office of Tax and Revenue — Offer in Compromise: otr.cfo.dc.gov/publication/offer-in-compromise ↗
• DC Office of Tax and Revenue — Enforcement Actions: otr.cfo.dc.gov/page/enforcement-actions ↗
• DC Office of Tax and Revenue — Appeals and Reconsiderations: otr.cfo.dc.gov/page/taxpayer-rights-appeals-and-reconsiderations ↗
• DC Office of Tax and Revenue — Taxpayer Advocate: otr.cfo.dc.gov/page/taxpayer-advocate ↗
• DC Office of Tax and Revenue — Collections FAQ: otr.cfo.dc.gov/page/collections-audit-faqs ↗
• DC Office of Tax and Revenue — Reconsideration Process: otr.cfo.dc.gov/page/how-do-i-request-reconsideration-decision-cea ↗
• DC Office of Administrative Hearings — oah.dc.gov ↗
• DC Code Title 47 — Taxation, Licensing, Permits, Assessments, and Fees: code.dccouncil.gov ↗
• DC Code § 47-4404 — Offer in Compromise: code.dccouncil.gov ↗
• DC Code § 47-4421 — Tax Lien: code.dccouncil.gov ↗
• DC Code § 47-4471 — Distraint (Levy): code.dccouncil.gov ↗
• DC Code § 47-4491 — Responsible Officer Personal Liability: code.dccouncil.gov ↗
• DC Code § 47-4302 — Collection Limitations: code.dccouncil.gov ↗
• DC Code § 47-4221 — Penalty Waiver for Reasonable Cause: code.dccouncil.gov ↗
• MyTax.DC.gov — Online Portal: mytax.dc.gov ↗

Disclaimer: This page provides general information about tax collection procedures in Washington, DC, and is not legal advice. Tax laws and agency procedures change. Always consult the official DC Office of Tax and Revenue website or a qualified tax professional for advice specific to your situation. No guarantee of any particular outcome is expressed or implied. Approval for payment plans, Offers in Compromise, penalty relief, and other resolutions is discretionary.