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Doubt as to collectibility exists in any case where the
taxpayer’s assets and income are less than the full amount of the
taxpayer’s assessed liability. Sec. 301.7122-1(b)(2), Proced. &
Admin. Regs. Respondent has prescribed procedures that are to be
used to determine doubt as to collectibility in the regulations
promulgated under section 7122, the IRM, and Rev. Proc. 2003-71,
2003-2 C.B. 517 (Revenue Procedure 2003-71).
Section 301.7122-1(c)(2)(i), Proced. & Admin. Regs., pro-
vides:
(i) Allowable Expenses.--A determination of doubt as to
collectibility will include a determination of ability
to pay. In determining ability to pay, the Secretary
will permit taxpayers to retain sufficient funds to pay
basic living expenses. The determination of the amount
of such basic living expenses will be founded upon an
evaluation of the individual facts and circumstances
presented by the taxpayer’s case. * * *
Part 5.8.1.1.3 of the IRM provides:
5.8.1.1.3 Policy (09-01-2005)
(1) Policy Statement P-5-100 states:
The Service will accept an offer in compromise when it
is unlikely that the tax liability can be collected in
full and the amount offered reasonably reflects collec-
tion potential. An offer in compromise is a legitimate
alternative to declaring a case currently not collect-
ible or to a protracted installment agreement. The
goal is to achieve collection of what is potentially
collectible at the earliest possible time and at the
least cost to the Government.
In cases where an offer in compromise appears to be a
viable solution to a tax delinquency, the Service
employee assigned the case will discuss the compromise
alternative with the taxpayer and, when necessary,
assist in preparing the required forms. The taxpayer
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Last modified: November 10, 2007