An Offer in Compromise is an offer from a taxpayer to settle a tax debt, usually for less than what is owed. This form of IRS tax relief may be based on (1) Doubt as to Collectability; (2) Doubt as to Liability; or (3) Effective Tax Administration. The most common Offer in Compromise is for Doubt as to Collectability.
Offers in Compromise (also referred to as the ‘Fresh Start Program’ or ‘Initiative by national companies’) are the most advertised and least accepted IRS solution. On October 25, 2004, the IRS issued a consumer alert advising taxpayers to beware of anyone claiming settlement of tax debts for “pennies on the dollar” through what is called the Offer in Compromise Program. Because most Offers in Compromise are filed by companies who make these promises, more than 90% of all Offers in Compromise filed in the U.S. are rejected by the IRS.