The IRS Can Make Offers in Compromise IRC Section 7122 authorizes the Internal Revenue Service to compromise any civil or criminal case arising under the internal revenue laws unless it has been referred to the Department of Justice for prosecution or defense. The Internal Revenue Service may compromise any tax controversy when there is doubt as to tax liability or collectibility . Compromise results in taxpayer paying less than asserted liability and closes taxpayer's entire tax liability for covered period. A compromise may be set aside in limited circumstances. Compromise A compromise is a particular type of settlement of a tax controversy .
Compromises usually take place at the collection stage.
They are agreements between the Internal Revenue Service and a taxpayer allowing the taxpayer to pay the government less in taxes than the asserted tax liability. Compromises are governed by the rules applicable to contracts. A compromise is generally not limited to one issue or transaction. Rather, a compromise is deemed to close the taxpayer's entire tax liability for the period covered, including liability for taxes, penalties, and interest. Procedure for an Offer in Compromise An offer to enter into a compromise agreement is called an Offer in Compromise .