Congress passed legislation signed by the president years ago that requires the Internal Revenue Service to issue guidelines for determining when an Offer In Compromise should be accepted. Congress explained that these guidelines should allow the Service to consider:
Public policy, and
Treasury Regulation § 301.7122-1 authorizes the IRS to consider OIC’s raising these issues. These offers are called Effective Tax Administration (ETA) offers.
The availability of an ETA offer encourages taxpayers to comply with the tax laws because taxpayers will believe the tax laws are fair and equitable. The ETA offer allows for situations where tax liabilities should not be collected even though:
The tax is legally owed, and
The taxpayer has the ability to pay it in full
No compromise to promote ETA may be entered into if compromise of the liability would undermine compliance by taxpayers with the tax laws.
If a taxpayer submits an ETA offer, the IRS will first investigate the offer for:
Doubt as to liability (DATL), and/or
Doubt as to collectability (DATC)
An ETA offer can only be considered when the Service has determined that the taxpayer does not qualify for consideration under DATL and/or DATC.
The taxpayer must include the Collection Information Statement (Form 433-A and/or Form 433-B) when submitting an offer requesting consideration under ETA.
Economic hardship standard of Treasury Regulation § 301.6343-1 specifically applies only to individuals.
For tax help, call Los Angeles tax attorney Mitchell A. Port at (310) 559-5259.