The ultimate goal of an offer-in-compromise is a settlement that
is in both the Government's and the taxpayer's best interest. The IRS will
accept an offer-in-compromise to settle unpaid accounts for less than the
amount owed when doubt exists as to whether or not you owe the liability,
or when there is doubt that the liability can be collected in full and
the amount you offer reasonably reflects your potential ability to pay.
This may be an alternative for resolving your tax delinquency.
If the basis of the offer is doubt that you owe the liability, for
example, a disputed assessment, you must provide a written statement of
supporting evidence. The Service cannot accept a compromise where the liability
has already been decided by a court.
To submit an offer-in-compromise you must complete Form
656; complete instructions are provided on the form. If the basis of
the offer is doubt that the liability can be collected in full, you must
submit Form 433A, Collection
Information Statement for Individuals, or Form
433B, Collection Information Statement for Businesses. These
forms provide a statement of your income, expenses, assets, and liabilities.
The amount of the offer should at least equal or exceed your equity
in all assets. When reviewing an offer, the IRS considers four factors:
- The amount collectible from your assets,
- The amount collectible from present and future income,
- The amount that can be collectible from 3rd parties; and
- Sources of funds that are available to you but not subject to the
Service's collection for example, workers compensation and veteran's benefits.
It is your responsibility to show how acceptance of the offer would
be in the best interest of the Government.
Generally, the IRS will not accept an offer unless it is clear that
you have complied with all current filing and paying requirements. The
acceptance of an offer by the IRS creates a "fresh start"; therefore,
the terms of the offer require future compliance with all tax filing and
paying requirements for a period of 5 years. If you do not abide by all
the terms of the offer, including the compliance requirement, the IRS may
reinstate the entire tax liability.
Additional information about the Offer-in-Compromise can be found
on Form 656, and in Publication
594, Understanding the Collection Process. Publications and
forms may be downloaded from
this site or ordered by calling 1-800-829-3676.
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