The Internal Revenue Service (IRS)
is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue. The IRS is responsible for collecting taxes and the interpretation and enforcement of the Internal Revenue Code.

Problems with IRS? Offer and compromise, credit report, all state taxes?

Confronted with Federal tax debts you can´t pay or believe you don´t owe? If so, you may be a candidate for an IRS Offer in Compromise. These guidelines and observations are designed to assist you in evaluating your tax situation and pursuing an IRS Offer in Compromise.

What Is An Offer In Compromise?

Section 7122 of the Internal Revenue Code authorizes any tax matter to be settled. It states:

The Secretary may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; and the Attorney General or his delegate may compromise any such case after reference to the Department of Justice for prosecution or defense.

This old Code Section allows the IRS great latitude to accept Offers in Compromise and develop regulations concerning them. Few understand that, generally, the IRS (and other government agencies) are often not bound by what they say or do because of a legal concept called “sovereign immunity.” This means they can reverse their decisions after a matter has been settled or can renege on a promise to follow a course of action even if that promise has been made in writing. There are, however, exceptions to this doctrine.

The Offer in Compromise section, quoted above, is one of the few areas in which the IRS is legally bound by its decision, permanently — in other words, “sovereign immunity” does not apply — providing, of course, the Offer is accepted and the Taxpayer complies with the conditions (i.e., the Taxpayer files tax returns for five years and remits full payments). Item 8(i) of the Offer Form 656 succinctly states:

The IRS will not collect more than the amount offered.

Many believe, or hope, that obtaining relief using an Offer in Compromise is merely a matter of “asking.” Not true. As with most benefits provided by the Government, there are procedures, instructions, and officials to deal with. The purpose of the following materials is to explore when an Offer should be considered and how Offers can be utilized.

Bases For Offers In Compromise

The acceptance of an Offer is based upon:

doubt as to the liability of the Taxpayer; OR
doubt as to the Taxpayer?s ability to pay the full tax due; OR
a combination of these two factors, in some cases.