Effective Tax Administration Offer In Compromise

There are three ways to request an Offer In Compromise from the IRS.  The first is Doubt as to Collectability.  This is by far the most common type of Offer. The second is Doubt as to Liability, which is not used very often.  The third (and newest) method under which you can submit an Offer is Effective Tax Administration.  This doctrine has been effect for several years and, even now, the parameters of the doctrine are still being determined by attorneys and Revenue Officers in the field.

Basically the doctrine says that when a taxpayer submits an Offer under the Effective Tax Administration doctrine, he admits that he has enough equity in assets to pay the tax debt.  However, due to special and extenuating circumstances, he feels the government should accept a token payment from him in lieu of payment in full.  The special circumstances are, of course, determined on an individual basis.  Some examples of circumstances that would probably be accepted are:  (a) the taxpayer has a terminal illness and his assets are needed for medial care; (b) the taxpayer (or taxpayers) are old and live on Social Security and their only asset is a house which they own free and clear; (c) the taxpayer is on Social Security disability and has a retirement fund which is used to support him and provide necessities of life. Another example which is having some success in these hard economic times is one in which the taxpayer has been unemployed for some time, has no hope of obtaining work in the foreseeable future and has cashed out her 401-K, IRA or retirement account to obtain money on which to live.  Again, each case will be assessed on an individual basis.