The IRS has the ability to settle or compromise a tax liability. There are a few avenues for doing this, one of which is the IRS’s offer in compromise program.
This program has been in place for quite a long time. Like many things in tax and with the IRS, many aspects of the program have remained the same since its inception.
One of the policies underlying the offer in compromise program is that there should be a way to settle tax debts and, in essence, obtain a fresh start. Another policy is that there are some instances where the taxpayer should not have to pay the tax because it is not legally owed or, separately, collecting the tax would just be unfair given the circumstances.
There are three variations of the offer in compromises that can be submitted–one based on each of these policies. The first variation deals with situations where a taxpayer cannot pay the tax liability and needs a fresh start. The second variation deals with tax liabilities that are not owed, but the time or process for correcting the tax liability has passed or is not available. The third variation comes up in situations where it would be unjust to collect the tax, such as cases of hardship or equity.
There are a number of rules that apply to this program and, naturally, details matter. We can help with this. We advise clients on tax debt remedies such offer in compromises daily. Please contact us immediately if you have an unpaid tax debt and would like to consider whether an offer in compromise might be an appropriate solution.