Seeing offers in compromise through the eyes of the IRS
In recent blog posts, we’ve explored some of the events that may trigger a tax audit, as well as reasons why so many taxpayers fear communication from the Internal Revenue Service. Although we’ve mentioned the administrative process by which tax liabilities might be settled, today’s post, the first in a two-part series, takes a closer look at offers in compromise – agreements whereby the IRS resolves a tax controversy by accepting less than the full amount at issue.
As a preliminary matter, it should be noted that offers in compromise differ from traditional settlements in some important ways. In a trial, opposing parties may base settlement decisions primarily on litigation hazards — that is to say, a party’s perception that it may not win the case. Such tactical strategy greatly influences a party’s willingness to consider settlement offers.