The Ultimate Guide to IRS Offers in Compromise in 2021

Taxpayers who owe taxes to the Internal Revenue Service have a couple of recourses to handle their debt. While many benefit from installment agreements, taxpayers whose tax debts far exceed their incomes and ability to pay may not find these types of solutions feasible. Taxpayers who are unable to repay what they owe to the IRS might benefit from a different program called an Offer in Compromise.

What is an offer in compromise?

The IRS offer in compromise is a program through which the IRS allows taxpayers to settle their tax liabilities for less than what they owe. The authority to accept less than what is owed is granted by 26 U.S. Code § 7122. Under this statute, taxpayers may submit lump-sum offers in compromise to settle their tax debts through a lump-sum payment or periodic payment offers in compromise to settle their liabilities through a finite number of periodic payments. If a taxpayer submits an offer in compromise to the IRS for a lump-sum, he or she will be required to submit an initial payment with the offer. People who submit periodic payment offers in compromise must submit the amount of the initial periodic payment with their offers.

Under IRM 5.8.1, the IRS will accept an offer in compromise when it deems the tax liability to be otherwise uncollectible. It may also agree to an offer in compromise when there is doubt about the liability owed and … Read the rest