- 3 -
Respondent’s service center processed petitioner’s return as
though petitioner were entitled to the amount of the childcare
credit claimed by him on Schedule 2.
B. Disposition of the Claimed Overpayment
At the time that petitioner filed his 1997 return, he was
liable for unpaid income taxes for 1988 and 1989. Accordingly,
in May 1998, respondent credited the $694 overpayment claimed by
petitioner on his 1997 return against his 1988 liability.3
C. Petitioner’s Offer in Compromise
On or about February 24, 1998, petitioner submitted an offer
in compromise, Form 656, seeking to compromise his outstanding
income tax liabilities for 1988 and 1989 in exchange for (1) the
payment of a fixed amount of money and (2) agreeing to various
terms and conditions. Respondent accepted petitioner’s offer in
compromise on or about July 24, 1998.
Paragraphs (g) and (j) of the offer in compromise provided
in pertinent part as follows:
(g) The IRS will keep any refund, including interest,
due to me/us because of overpayment of any tax or other
liability, for tax periods extending through the
calendar year that the IRS accepts the offer.[4] * * *
3 So stipulated. Although the bookkeeping entries may have
been made in May 1998, the transcripts of account for both the
overpayment year (1997) and the liability year (1988) indicate
that the credit was effective April 15, 1998.
4 Read literally, paragraph (g) would appear to entitle
respondent to “keep” a taxpayer’s refund even if the amount
thereof exceeded the taxpayer’s total outstanding liability that
(continued...)
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