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The settlement of disputed tax liabilities is governed by
sections 7121 and 7122, which authorize the Secretary or an
authorized delegate to settle any tax disputes and compromise any
civil or criminal case arising under the internal revenue laws.
Klein v. Commissioner, 899 F.2d 1149, 1152 (11th Cir. 1990).
Regulations under section 7122 clarify the procedure required
with respect to an offer in compromise and how an offer may be
accepted. Section 301.7122-1(d)(1), Proced. & Admin. Regs.,
requires that offers in compromise shall be submitted on forms
prescribed by the Internal Revenue Service. Section 301.7122-
1(d)(3), Proced. & Admin. Regs., states that "An offer in
compromise shall be considered accepted only when the proponent
thereof is so notified in writing."
Petitioners submitted a Form 656 to Mr. Sower on August 1,
1993. In the Form 656, petitioners offered $2,000 to settle
their income tax liabilities for the years in issue plus certain
withholding tax liabilities. Petitioners withdrew the original
Form 656 on February 10, 1994, and submitted two separate offers
on Forms 656 in place of the first. Each Form 656 referred to
above contains a statement whereby the taxpayer-proponent agrees
to waive and suspend the statutory period of limitations for
assessment and collection. The Forms 656 also contain a
signature line for an authorized Internal Revenue Service
official to acknowledge that "I accept the waiver of statutory
period of limitations for the Internal Revenue Service." Mr.
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Last modified: May 25, 2011