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Irs Offer in Compromise: Liabilities
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The IRS will accept an Offer in Compromise when it is unlikely that the tax liability can be collected in full, and the amount of the Offer in Compromise reasonably reflects collection potential. An Offer in Compromise is a legitimate alternative to declaring a case as currently not collectible, or to a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the government.
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Recent changes to the IRS offer in compromise program have made it more difficult than ever to successfully settle disputes with the IRS. Learn from a former IRS insider how to best to achieve compromise with the IRS and settle tax obligations for less than the full liability owed. Join this live, 60-minute audio conference where you will discover:
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The IRS will keep any tax refund, including interest due, as the result of an overpayment of any tax or other liability for the tax period extending through the calendar year the IRS accepts the OFFER IN COMPROMISE. A taxpayer may not designate a refund and/or overpayment to be applied to estimated tax payments for the following year. This condition does not apply if the OFFER IN COMPROMISE is based on Doubt as to Liability only.
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Effective Tax Administration (ETA), as mentioned directly above, allows the IRS to take into consideration exceptional circumstances that would make it inequitable for an Offer not to be accepted. When submitting an Offer based on ETA, a Taxpayer has to prove that he or she is not eligible to submit an Offer under the doubt as to liability or doubt as to
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Compromising employment taxes presents special problems.23 Offers in Compromise are frequently considered in these cases for two reasons: First, the magnitude of the liability, even for a small employer, can be staggering. Second, unlike income taxes, employment taxes, and the related trust fund recovery penalty, cannot be discharged in bankruptcy, and ... bankruptcy is not an option.
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This will result in processing delays and could be grounds for the IRS ultimate decision to reject an OFFER IN COMPROMISE. The IRS is observing a large upsurge of receipts in which the offered amount is clearly much lower than the reasonable collection potential illustrated on the taxpayer's financial statement. Furthermore, in a large number of these cases, the financial statement ... shows that the taxpayer has a clear ability to satisfy the liability in full, or via an installment agreement during the course of the collection statute, and the taxpayer cites no special circumstances.
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