- 9 -
estimated $130,000 liability. The settlement officer explained
his methodology as follows:
As I indicated in my previous letter, administrative
guidance found in Internal Revenue Manual (“IRM”) sec.
5.8.11.2.2(10) specifically states that:
The Service will not compromise on public policy
or equity grounds based solely on the argument
that the acts of a third party caused the unpaid
tax liability.
The regulations in 26 C.F.R sec. 301.7122-1(b)(3)(iii)
preclude settlement if compromise would undermine the
general public’s compliance with our nation’s tax laws.
IRS has taken this stance with respect to settlement of
TEFRA matters such as your[s]. IRM sec. 5.8.11.2.2(3)
provides an example that resembles your case. The
existing administrative policies and procedures simply
preclude me from being able to secure the necessary
approvals of a non-hardship Effective Tax
Administration (“ETA”) offer in your case. I am not,
however, precluded from considering the merits of your
case under standard doubt as to collectibility or ETA
hardship criteria.
For an offer in compromise based upon doubt as to
collectibility to be accepted, you must generally offer
an amount that meets or exceeds reasonable collection
potential (“RCP”). RCP has two primary components:
1. Net realizable equity in assets, and
2. The present value of your future ability to
pay toward the tax debt
Net realizable equity in assets is simply the
difference between the quick sale values (generally
80 percent of fair market values) of your assets minus
the amounts owed on the interests and encumbrances
having priority over the federal tax liens. The
present value of your future income is determined by
subtracting necessary living expenses (those necessary
for your health, welfare and the production of income)
from your monthly income. For Appeals to accept your
offer under ETA hardship provisions, you must be able
to demonstrate that payment of more than $20,652 would
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: March 27, 2008