The IRS Can Make Offers in Compromise
IRC Section 7122 authorizes the Internal Revenue
Service to compromise any civil or criminal case arising under the internal
revenue laws unless it has been referred to the Department of Justice for
prosecution or defense. The Internal Revenue Service may compromise any
tax controversy when there is doubt as to tax liability or collectibility.
Compromise results in taxpayer paying less than asserted liability and
closes taxpayer's entire tax liability for covered period. A compromise
may be set aside in limited circumstances.
What is an Offer in CompromiseA compromise is a particular type of settlement of a tax
controversy. Compromises usually take place at the collection
stage. They are agreements between the Internal Revenue Service and a taxpayer
allowing the taxpayer to pay the government less in taxes than his asserted
tax liability. Compromises are governed by the rules applicable to contracts.
Grounds for an Offer in Compromise
The Internal Revenue Service has complete discretion whether
to enter into a compromise, and will entertain an offer in compromise only
if it is based on one or both of the following grounds:
Most compromises allow a taxpayer to pay the government
less in taxes than owed, and are based on the taxpayer's inability
to pay the admitted tax liability (including penalties and interest).
- doubt as to the taxpayer's liability
for the tax;
- doubt as to the collectibility of the
Covers All Tax Matters
A compromise is generally not limited to one issue
or transaction. Rather, a compromise is deemed to close the taxpayer's
entire tax liability for the period covered, including liability for taxes,
penalties, and interest. Thus, compromise as to part of a tax liability
(a penalty, for example) may have the result of foreclosing the right to
dispute other parts of the tax liability.
To find out How to Obtain an Offer in Compromise....