IRS supplements OIC procedures.

• Position: Offers in compromise

A recent revenue procedure explais the procedures for submission and processing of offers-in-compromise (OIC) under Sec. 7122. It reflects changes to the law made by the Internal Revenue Service Restructing and Reform Act of 1998, and supplements and clarifies the procedures in Regs. Sec 301.7122-1.

The procedure applies to all offers to compromise a civil or criminal liability under Sec. 7122 submitted to the Service, except for those submitted (1) directly to the Office of Appeals and (2) after a case is referred to the Department of Justice. (For a discussion of the regulations, see Tax Practice & Procedures, "OIC Final Regs. Issued," TTA, Jan.2003, p.452.)

Offer Submission

An OIC must be submitted in writing on the Service's Form 656, Offer in Compromise. None of the standard terms may be stricken or altered and the form must be signed under penalty or perjury. The offer should includdde all liabilities to be covered by the compromise, the amount the taxpayer proposesto pay and the payment terms. Payment terms include the payment amounts and due dates.

The offer should also contain any other information required by Form 656. The Service occasionaly revises Form 656 and may require OICs to be submitted on the most recent version of the form, which is available on the Service's website at www.irs.gov. Although the offer should be mailed to the appropriate address listed on Form 656, the Service may, in its discretion, receive OICs in other ways.

The offer should set forth the legal grounds for compromise and provide sufficient information for the Service to determine whether it fits within its acceptance policies, including (1) doubt as to liability, (2) doubt as to collectibility or (3) promotion of effective tax administration, as set forth in the regulatins and the procedure. It should include all information needed to verify the grounds for compromise. Except for offers based solely on doubt as to liability, this includes financial information provided in a manner approved by the Service.

Individual or self-employed taxpayers must submit Form 433-A. Collection Information Statement for Wage Earners and Self-Employed Individuals, with any required attachments or other documentation. Corporate or other business taxpayers must submit Form 433-B, Collection Information Statement for Businesses, with any required attachments or other documentations. The Service may require corporate officers or individual partners of a business taxpayer to...