What Is An Offer-In-Compromise?

Under the federal tax code, the IRS has the ability to compromise tax, interest, and penalties on certain grounds. For the IRS to consider such a compromise, the taxpayer must submit Form 656, “Offer in Compromise,” with the attachments requested in the instructions to the form. There are three grounds on which the IRS may grant the offer-in-compromise request: (1) doubt as to liability, (2) doubt as to collectibility, and (3) to promote effective tax administration.

The federal regulations provide that, where there is a genuine dispute as to the existence or amount of the correct tax […]