Offer in compromiseSEE 3.3.1.c · TaxEar teaching deck

SEE OUTLINE 3.3.1.c

Offer in compromise

The three grounds, what has to come with it, and the 24-month clock that runs against the IRS.

Three grounds. Only three.

  1. 01
    Doubt as to liability
    A genuine dispute over what's owed.
    → closed once a court has already decided it
  2. 02
    Doubt as to collectibility
    Assets and income add up to less than the full liability.
  3. 03
    Effective tax administration
    Full payment is possible, but would cause real hardship — or equity says not to insist on it.

What has to come with the offer

20% down
24 months to answer

Lump sum (five or fewer payments): 20% up front. Periodic: the first installment up front, then every month while it's under review — miss a later one, and the offer can be treated as withdrawn.

24months

If the IRS doesn't reject the offer within 24 months of submission, the law treats that silence as acceptance. Not a technicality — diary this date the day the offer is filed.

Same $15,000 either way

Lump sum

$15,000

Paid once, from funds already on hand. Review closes with no live monthly obligation.

Periodic — 24 × $625

$625/mo

One missed installment — other than the first — can end the offer with no decision to appeal.

Three traps

  • Returned ≠ rejected. The fee comes back, and there's nothing to appeal.
  • A final judgment closes only ground one. The other two grounds stay open.
  • Low-income certification waives three things. The fee, the initial payment, and the installments during review.

The page is the source

IRC § 7122 · Reg. § 301.7122-1 · Form 656
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