What is an OFFER IN
An IRS offer in compromise is an agreement between a taxpayer
and the Internal Revenue Service (IRS) that resolves a taxpayer's
tax liability. The IRS has the authority to settle, or compromise,
federal tax liabilities by accepting less than full payment under
certain circumstances. The IRS may legally compromise for one of
the following reasons:
Doubt as to Liability Offer in Compromise: Doubt
exists that the assessed tax is correct.
Doubt as to Collectibility Offer in Compromise: Doubt
exists that the taxpayer could ever pay the full amount of
tax owed. The minimum offer amount must generally be equal
to (or greater than) the taxpayer's reasonable collection
potential (RCP). The RCP is defined as the total of the
taxpayer's realizable value in real and personal assets,
plus his/her future income.
Unless the taxpayer files an offer in compromise claiming
special circumstances, the offered amount must equal or exceed
the reasonable collection potential. Realizable value is the
asset's quick sale value (amount which could be reasonably
expected through the sale of the asset) minus what the taxpayer
owes to a secured creditor.
Effective Tax Administration Offer in Compromise:
There is no doubt that the tax is correct and no doubt that
the amount owed could be collected in full, but exceptional
circumstances exist such that collection of the full amount
would create economic hardship or where compelling public
policy or equity considerations provide sufficient basis for
compromise. The taxpayer bears the burden of proof to
show their offer in compromise qualifies for public policy or
equity considerations. They must show that their
circumstances are compelling enough to justify acceptance of
their offer in compromise compared to other taxpayers in
Offer in Compromise and IRS Policy:
Policy Statement P-5-100 states:
The Service will accept an offer in compromise when it is unlikely
that the tax liability can be collected in full and the amount
offered reasonably reflects collection potential. An offer in
compromise is a legitimate alternative to declaring a case
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. The Toll Free Number for an Offer
in Compromise is 1-866-482-9707.
Will an Offer in Compromise Work for
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information are provided. However, a tax professional, who
routinely deals with IRS collection matters and Offers in
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