Frequently Asked Questions
Who is eligible for the Offer-in-Compromise (OIC)?
Taxpayers must demonstrate an inability to pay the full amount or show that full payment would cause economic hardship; requires submission of Form 656 and financial disclosures.
How does the Offer-in-Compromise (OIC) work?
Allows a taxpayer to settle their tax liabilities for less than the full amount owed based on doubt as to collectibility, doubt as to liability, or effective tax administration.
What law authorizes the Offer-in-Compromise (OIC)?
The Offer-in-Compromise (OIC) is authorized under IRC §7122 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §7122
Source: Internal Revenue Code, Title 26, United States Code
§ 7122. Compromises(a) AuthorizationThe 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.
(b) RecordWhenever a compromise is made by the Secretary in any case, there shall be placed on file in the office of the Secretary the opinion of the General Counsel for the Department of the Treasury or his delegate, with his reasons therefor, with a statement of—(1) The amount of tax assessed,
(2) The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed, and
(3) The amount actually paid in accordance with the terms of the compromise.
Notwithstanding the foregoing provisions of this subsection, no such opinion shall be required with respect to the compromise of any civil case in which the unpaid amount of tax assessed (including any interest, additional amount, addition to the tax, or assessable penalty) is less than $50,000. However, such compromise shall be subject to continuing quality review by the Secretary.
(c) Rules for submission of offers-in-compromise(1) Partial payment required with submission(A) Lump-sum offers(i) In generalThe submission of any lump-sum offer-in-compromise shall be accompanied by the payment of 20 percent of the amount of such offer.
(ii) Lump-sum offer-in-compromiseFor purposes of this section, the term “lump-sum offer-in-compromise” means any offer of payments made in 5 or fewer installments.
(B) Periodic payment offers(i) In generalThe submission of any periodic payment offer-in-compromise shall be accompanied by the payment of the amount of the first proposed installment.
(ii) Failure to make installment during pendency of offerAny failure to make an installment (other than the first installment) due under such offer-in-compromise during the period such offer is being evaluated by the Secretary may be treated by the Secretary as a withdrawal of such offer-in-compromise.
(2) Rules of application(A) Use of paymentThe application of any payment made under this subsection to the assessed tax or other amounts imposed under this title with respect to such tax may be specified by the taxpayer.
(B) Application of user feeIn the case of any assessed tax or other amounts imposed under this title with respect to such tax which is the subject of an offer-in-compromise to which this subsection applies, such tax or other amounts shall be reduced by any user fee imposed under this title with respect to such offer-in-compromise.
(C) Waiver authorityThe Secretary may issue regulations waiving any payment required under paragraph (1) in a manner consistent with the practices established in accordance with the requirements under subsection (d)(3).
Showing first 3,000 characters of full section text.