3 types of Offers in Compromise

There are 3 types of offers in compromise used by the IRS. They are as follows and are taken from the IRS site regarding Offers:

Three Types of OICs

The IRS may accept an offer in compromise based on three grounds:

1. Doubt as to Collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.

Example: A taxpayer owes $20,000 for unpaid tax liabilities and agrees that the tax she owes is correct. The taxpayer?s monthly income does not meet her necessary living expenses. She does not own any real property and does not have the ability to fully pay the liability now or through monthly installment payments.

2. Doubt as to Liability – A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer?s evidence or (3) the taxpayer has new evidence.

Example: The taxpayer was vice president of a corporation from 2004-2005. In 2006, the corporation accrued unpaid payroll taxes and the taxpayer was assessed a trust fund recovery penalty as a responsible party of the corporation. The taxpayer was no longer a corporate officer and had resigned from the corporation on 12/31/2005. Since the taxpayer had resigned prior to the payroll taxes accruing and was not contacted prior to the assessment, there is legitimate doubt that the assessed tax liability is correct.

3. Effective Tax Administration – There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
Also note that all information given to IRS re there financial statements are a full and through investigation.
Experienced experts can help you through this problem. Care should be given before filing any offer.

Related posts:

1. Offers in Compromise, Numbers and Facts.
2. Offers in Compromise. Most People Do Not Qualify.
3. Offers in Compromise. Five Year Compliance.
4. BEWARE-Accepted Offers in Compromise- A rare thing- Former IRS Agent
5. There are 2 Types of Levies. A Bank or Third Party and a Wage Levy.