IRS Public Policy Statements
After working for Internal Revenue Service for the past 10 years few taxpayers know that IRS has public policies.
You will not find them within the internal revenue manual but on policy notices that you can find online.
Set forth here is the IRS Public Policy Statement regarding Offer in compromises
5.8.1.1.3 (02-26-2013)
Policy
Policy Statement P-5-100 in IRM 1.2.14.1.17, states:
The Service will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential.
An OIC is a legitimate alternative to declaring a case currently not collectible or a protracted installment agreement.
The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the Government.
A protracted installment agreement is one that extends beyond the Collection Statute Expiration Date.
Offers to be accepted.
In cases where an OIC appears to be a viable solution to a tax delinquency, the Service employee assigned the case will discuss the compromise alternative with the taxpayer and, when necessary, assist in preparing the required forms.
The taxpayer will be responsible for initiating the first specific proposal for compromise.
The success of the OIC program will be assured only if taxpayers make adequate compromise proposals consistent with their ability to pay and the Service makes prompt and reasonable decisions.
Taxpayers are expected to provide reasonable documentation to verify their ability to pay.
The ultimate goal is a compromise that is in the best interest of both the taxpayer and the government.
Acceptance of an adequate offer will also result in creating for the taxpayer an expectation of a fresh start toward compliance with all future filing and payment requirements.
Unless special circumstances exist, offers will not be accepted if it is believed that the liability can be paid in full as a lump sum, or by installment payments extending through the remaining statutory period for collection, or other means of collection.
Generally, a DATC offer amount must equal or exceed a taxpayer’s reasonable collection potential (RCP) in order to be acceptable.
In most cases, when the offered amount exceeds the RCP, the acceptance should be for the amount offered.
The exceptions include special circumstances defined in IRM 5.8.4 and acceptance on the basis of hardship or effective tax administration (ETA) as defined in IRM 5.8.11.
