What is Offer in compromise?
In short
An offer in compromise is an agreement with the Internal Revenue Service to settle a tax debt for less than the full amount, based on doubt as to collectibility, doubt as to liability or effective tax administration.
Key takeaways
- It is submitted on Form 656 with an application fee and an initial payment, unless the taxpayer qualifies as low income.
- The taxpayer must have filed all required returns and be current on estimated payments.
- Once accepted, the taxpayer must stay compliant for 5 years or the agreement can be cancelled.
Where it's tested
REG: Internal Revenue Service (IRS) Procedures & Appeals — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A taxpayer wishes to dispute a proposed deficiency without first paying the disputed amount. Which court must the taxpayer use?