THE IRS MAY NOT HAVE THE AUTHORITY TO ACCEPT AN OFFER IN COMPROMISE WHEN:
- Questions concerning the amount of the taxpayers liability or the collection of the liability for all or part of the periods the taxpayer owes is in litigation.
- The federal tax liability for all or part of the periods the taxpayer owes has been reduced to a judgment. Judgment periods are different in most states so you must check on a state by state basis.
- If an offer is received that covers tax periods for which restitution was ordered, the IRS cannot accept an OIC that in any way modifies the terms of a restitution order. The IRS may consider an OIC for periods for which restitution was ordered only if the defendant has paid or will pay the full amount of the restitution as part of the offer.
- The IRS has a civil or criminal prosecution pending against the taxpayer in the Department of Justice or United States Attorneys Office. Acceptance by the IRS is dependent upon the Department of Justice accepting a related offer or settlement.
DISTRICT COUNSEL OFFICE
District Counsel attorneys provide opinions on OIC’s recommended for acceptance when the total liability, including additions and accrued penalty and interest, is $50,000 or greater. District Counsel Office, when requested, will provide legal opinions for matters related to investigation and processing of offers in compromise.
TAXPAYER ADVOCATE SERVICE OF THE INTERNAL REVENUE SERVICE
The Taxpayer Advocate Service is an independent organization within the IRS whose employees assist taxpayers in solving tax problems that have not been resolved through normal channels, or who are experiencing significant hardships. IRS employees who work as taxpayer advocates may request expedited processing of an Offer in Compromise if they deem such action necessary.
TAXES, PENALTIES, AND INTEREST CONSTITUTE ONE LIABILITY
An Offer in Compromise is effective for the entire assessed liability of tax, penalties, and interest for the years or periods covered by the offer. All questions of tax liability for the years or periods covered by the agreement will be settled. Neither the taxpayer nor the federal government can reopen a compromised tax year or period unless there was falsification of information or documents, concealment of ability to pay and/or assets, or a mutual mistake of a material fact which would be sufficient to set aside or reform a contract.
TAX LIABILITY THAT HAS NOT YET BEEN ASSESSED
- The Internal Revenue Service will not consider an offer that is solely for a tax period or tax year that has not been assessed unless the IRS computer system indicates a return has been received or an assessment is pending. A simple computer check is made to find out if this is so.
- Taxpayers may submit, and the internal Revenue Service must consider, an offer to compromise taxes due on tax returns which have been filed but have not yet been assessed. However, before the offer can be accepted, the taxes must be assessed.
APPLICATION FEES APPLICABLE TO OFFERS IN COMPROMISE
- Effective November 1, 2003, the Internal Revenue Service began charging an application fee.
- The application fee applies only to certain offers processed.