An offer to compromise based on doubt as to collectibility
generally will be considered acceptable if it is unlikely that the tax can be collected in full and the offer reasonably reflects the amount the IRS could collect through other means, including administrative and judicial collection remedies.
Practitioners should be aware that the DOR can compromise proposed assessments using three distinct theories or methodologies: 1) doubt as to liability regarding tax, penalty, and interest assessments; 2) doubt as to collectibility regarding tax, penalty, and interest assessments; and 3) reasonable cause regarding penalty assessments.
While the dispute resolution process may not always provide the best opportunity for doubt as to liability compromises (although it can help to crystalize the issues for subsequent litigation), this forum can be a viable means for resolving assessments based on doubt as to collectibility and penalty assessments based on reasonable cause.
Assuming that the taxpayer comes with "clean hands" and cooperates with the DOR's doubt as to collectibility evaluation, the process of determining whether a taxpayer is eligible for a doubt as to collectibility compromise begins with an evaluation of the taxpayer's financial position.
evaluation indicates that the taxpayer cannot pay the full assessment either immediately or by stipulated payment arrangement, a doubt as to collectibility compromise will usually be offered.
There are several approaches which can be taken by the DOR in determining how an assessment will be resolved when there is doubt as to collectibility.
Therefore, the representative should closely examine the taxpayer's expenditures before submitting the doubt as to collectibility compromise request to the DOR.
When a determination of liability is pending in the Examinations or Appeals divisions and an offer is made solely on doubt as to collectibility
, the respective division secures the taxpayer's conditional acceptance of a definite amount of liability, and then the Collection Division considers the offer based on collectibility.
In the IRSRRA '98, Congress directed the Service to consider factors other than doubt as to collectibility
Accordingly, this article will discuss offers in compromise based on doubt as to collectibility.
1, which provides that when doubt as to collectibility is the basis for the offer, the amount offered must reflect "all that can be collected from the taxpayer's equity in assets and income, present and prospective," after giving effect to all priorities granted to the Government.
Division, Appeals or Tax Court] can be compromised on doubt as to collectibility, See IRM Sections 5711011.