New law tightens rules for IRS offer in compromise program.

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The recently enacted Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) made major changes to the offer in compromise (OIC) program. The law tightens the rules for lump-sum offers and periodic-payment offers. Taxpayers submitting new offers must make a 20 percent nonrefundable, up-front payment in many cases.

An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment in certain circumstances.

Taxpayers submitting requests for periodic-payment OICs must include the first...

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