The IRS Internal Revenue Manual (IRM) has special rules for appeals of an Offer in Compromise (OIC). The Appeal procedures are intended to be consistent with the procedures in the regular OIC rules considered by an IRS Offer Specialist who initially gets the Offer when it is received. All of those rules are relevant.
If an OIC is rejected, a taxpayer has 30 days to do the appeal. That is a “drop-dead” deadline. But Appeals will treat the post-make date as the date of receipts.
An offer in compromise (OIC) DATC is an agreement between a taxpayer and the IRS that settles a taxpayer's entire tax debt for less than the full amount owed. The IRS looks at the collection potential of a taxpayer’s assets in income in excess of that person’s reasonable and necessary living expenses. Assuming that a taxpayer has nominal assets and no income in excess of that person’s reasonable and necessary living expenses, a $10 million tax debt could be settled for $1,000. That is, the IRS is focused on what they call “reasonable collection potential” (RCP) and not the amount of the tax debt owed, no matter how large the tax debt. This settlement is based on tax law, tax regulations, the Internal Revenue Manual administrative guidelines, and judicial precedent.
Answers to several key questions regarding the Offer in Compromise process.
Section 7122 (a) of the IRS Code states that the IRS 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.
The IRS will accept an offer-in-compromise to settle unpaid accounts for less than the amount owed when there is doubt that the liability can be collected in full and the amount you offer reasonably reflects collection potential.
An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances.
The IRS will agree to an offer in compromise settlement based on “reasonable collection potential” (RCP). RCP is determined based on the net value of assets plus income in excess of reasonable and necessary expenses in all doubt-as-to-collectability (DATC) cases. There is an exception for “special circumstances.”