•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.
•The IRS has the authority to settle or
compromise federal tax
liabilities by accepting less than full amount under certain circumstances. One of the following factors must be established
in order for the IRS to
accept an Offer in Compromise and settle the liability:
•The taxpayer cannot pay off the liability;
•There is doubt that the taxpayer
actually owes the liability;
•The settlement would promote effective
tax administration.