Offer in Compromise Guidelines: Tips For Success

For a taxpayer, an Offer in Compromise represents a great opportunity to resolve tax debt and move forward. For the IRS, accepting an Offer in Compromise represents the same opportunity, but it comes with the expectation that taxpayers will begin to pay their taxes on time. The following are a few helpful tips and words of caution to anyone pursuing an Offer in Compromise.

Firstly, taxpayers should be advised that the IRS has a right to any tax refund still due to the individual for any years up to and including the year in which the Offer is accepted. After that year, the taxpayer regains his/her right to receive tax refunds.

Secondly, it is important to remember that an individual whose Offer was accepted by the IRS must continue to make all payments on time, no matter the type of installment plan. If he/she does not, the IRS may change the Offer in Compromise to default status.

Thirdly, upon accepting an Offer, the IRS demands that the taxpayer remain up-do-date with their tax filings for five years afterward. Form 656 section V stipulates that, after having an Offer accepted, taxpayers must submit all tax returns in a timely manner. Failure to do so jeopardizes the status of the Offer.

In the event of an Offer becoming default, the original Offer In Compromise becomes void; the full amount of the initial tax debt takes effect, complete with interest and penalties, and the duration of the Offer in Compromise is added to the Statute of Limitation on the initial tax liability.

For these reasons, it is important to know all of the rules and regulations that provide the framework for Offers.