OIC user fee.

• Author: Laffie, Lesli S.
• Position: Offers-in-compromise

Proposed regulations (KEG-10377702) would require a $150 user fee for some offers-in-compromise (OICs), effective 30 days after the rules are finalized.

Sec. 7122 gives the IRS the authority to compromise any civil or criminal case arising under the Code, before referring the case to the Department of Justice. Regs. Sec. 301.7122-1 provides officer and employee guidelines to determine whether an OIC is adequate and should be accepted. Under Regs. Sec. 301.7122-1(b), an offer may be accepted if there is doubt as to liability or collectibility, or if acceptance will promote effective tax administration.

The IRS initially determines whether an OIC is processable. An OIC would be returned as non-processable if the taxpayer is in bankruptcy, has not filed required returns or has not perfected the offer by properly preparing the form and submitting other required documents. Otherwise, the OIC is accepted for processing and cannot be rejected without an independent administrative review of the decision to reject (and an independent review by the Office of Appeals (Appeals) if the taxpayer chooses to appeal the rejection).

When the IRS accepts an offer, the taxpayer receives the benefit of resolving tax liabilities for a compromised amount. Even if an OIC is rejected, the IRS has processed it and determined the adequacy of the amount offered. The IRS must value assets, verify income-earning potential and compute allowable expenses.

The taxpayer also receives the benefit of certain deferred collection activities. The Service generally does not make any levies to collect liabilities while evaluating the offer, for 30 days immediately following the rejection of an offer and during any period...