An Offer in Compromise is an agreement between a taxpayer and IRS that settles a tax liability for payment of less than the total amount determined and assessed. Generally, the IRS expects that all taxpayers will pay the total amount of tax due, regardless of the amount. However, IRS recognizes that it's both sound business practice and good tax policy to settle some cases for less than the total amount due. To obtain this relief the taxpayer must first submit an offer-in-compromise (OIC).
The IRS may accept a taxpayers' offer to compromise their tax liability when:
there is doubt about the debt's collectability
there is doubt about the taxpayer's liability for the taxes or
to promote effective tax administration because either
collection of the full amount would cause economic hardship for the taxpayer, or
compelling public policy or equity considerations provide a sufficient basis for compromising the liability.
The Form 656 Booklet contains all the forms needed by an individual or a business to submit an OIC to the IRS. Anyone submitting an offer to the IRS must use the most current version of the booklet (Rev. 4-2022) to avoid issues with processing.
The IRS also encourages anyone thinking about submitting an offer to use the IRS's Offer-in-Compromise Pre-Qualifier Tool to verify their eligibility to file one.
Marini & Associates, P.A.
Read more at: Tax Times blog