Many people have seen the various national tax agencies on daytime television offering to settle their tax debt for cents on the dollar. However, what doesn't appear in their sales pitch is that nearly 80 percent of the IRS's compromise offers are rejected for a variety of reasons. This isn't all bad, but it does require some strategic planning on the part of the taxpayer. In addition, since appeals officers have a more mediating role, I have found that discussions on appellate issues are much less contentious than at the supply level.
Accounting Today is a leading provider of online business news for the accounting community, offering breaking news, in-depth articles, and a wealth of resources and services. The IRS will not keep a record of a withdrawn transaction offer, but a rejected offer will be counted in your history, especially if the reason why it was rejected has not been corrected. Carefully evaluate the position of the offer and what you can do to strengthen it and make it more favorable to the IRS. As a reminder to the reader, an IRS commitment offer (OIC) is a tax agreement with the IRS in which the taxpayer agrees to pay a specific amount and the IRS agrees to commit the remaining liability.
However, sometimes you're lucky and sometimes you can get one approved, especially if the position proposed by your bidding specialist is ridiculous. This is how an IRS commitment offer works, what you need to qualify, and what you should know about the program. Find the forms for submitting an application and the step-by-step instructions in Form 656-B, commitment offer brochure (PDF). Keep in mind that the rejection of a commitment offer and the return of a commitment offer are not the same thing.
If a compromise offer isn't for you or the IRS rejects it, you may still have other options through the IRS to obtain tax relief, such as applying for an installment payment plan or requesting the “currently uncollectible” condition. If that amount is less than what you owe (and meets the other requirements of the commitment offer), your offer will likely be accepted. If you have reason to believe that you might qualify for IRS debt forgiveness through a commitment offer, see the commitment offer brochure and Form 656.
