- 13 - The Secretary may compromise a tax liability based on doubt as to collectibility where the taxpayer’s assets and income are less than the full amount of the assessed liability. Sec. 301.7122-1(b)(2), Proced. & Admin. Regs. Generally, under the Commissioner’s administrative pronouncements, an offer-in- compromise based on doubt as to collectibility will be acceptable only if it reflects the taxpayer’s reasonable collection potential. Rev. Proc. 2003-71, sec. 4.02(2), 2003-2 C.B. 517, 517. In some cases, the Commissioner will accept an offer of less than the reasonable collection potential if there are “special circumstances”. Id. Special circumstances are: (1) Circumstances demonstrating that the taxpayer would suffer economic hardship if the IRS were to collect from him an amount equal to the reasonable collection potential; or (2) circumstances justifying acceptance of an amount less than the reasonable collection potential of the case based on public policy or equity considerations. See Internal Revenue Manual (IRM) sec. 5.8.4.3(4). However, in accordance with the Commissioner’s guidelines, an offer-in-compromise based on doubt as to collectibility with special circumstances should not be accepted if the taxpayer does not offer an acceptable amount. See IRM sec. 5.8.11.2.1(11) and .2(12). The Secretary may also compromise a tax liability on the ground of effective tax administration when: (1) Collection ofPage: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
Last modified: May 25, 2011