Offer In Compromise —
Code Section 7122 authorized the Commissioner or his delegate the authority to compromise most tax liabilities. An Offer in Compromise is an agreement between you and the IRS that allows your delinquent tax debt to be settled for less than the amount owed. The offered dollar amount is based on your net worth plus your future income potential. A tax debt can be legally compromised for one of the following reasons:
1)Doubt as to Liability —
Doubt exists that the assessed tax is correct.
2)Doubt as to Collectibility –
Doubt exists that you could ever pay the full amount of tax owed.
3)Effective Tax Administration –
Although the tax is correct and the amount owed could be collected, an exceptional circumstance exists that allows the IRS to consider an Offer in Compromise. To be eligible for a compromise on this basis, you must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.
