Go to Balmora and join the Thieves Clan in the Southwall Cornerclub. The man at the counter downstairs can take of your bounty for a price. To get rid of it for free, drop all your money in one of the crates outside the Cornerclub. Go inside and talk to the man downstairs behind the counter. Choose to talk to him about the price on your head. Accept to pay, but since you have no money in your inventory, you will not lose anything and your bounty will be gone. Go back outside and get your money from the crate.
