What Is An Offer In Compromise   What is an offer in compromise? The IRS currently has a program known as an Offer in Compromise which provides financially distressed taxpayers an opportunity to settle all outstanding taxes, interest and penalties for a lump sum which is less than the total amount owed. The amount of the offer will vary depending upon your income, assets, liabilities and future income prospects. Current IRS guidelines allow for this lump sum to be paid in several installments over a period as long as two years, however, the total payments tend to be higher than under a lump sum offer.     The negotiation of an offer is a lengthy process usually taking from 6 months to a year, but sometimes longer. During the time the offer is pending the IRS will not require any payments on old taxes. However, during the time an offer is pending you must pay all of your current taxes as they become due including any quarterly estimated income tax payments, and federal payroll tax deposits. If you fail to do so the IRS will immediately reject your offer, and you will not be entitled to any appeal rights. Furthermore, your deposit, discussed below, will be applied to your taxes, and if you wish to make a new offer you will need to make an additional deposit.     At the time the offer is submitted a deposit must be submitted. The amount of the deposit is 20% of the amount offered for a “lump sum” offer. For a periodic payment offer you must include the first proposed installment with the offer. While the IRS is evaluating a periodic payment offer, you must make subsequent proposed installment payments as they become due. If the offer is rejected, withdrawn, or returned the IRS keeps any deposits made, and applies them to the back taxes you owe.      If the offer is accepted you must timely file and pay all taxes (including any estimated taxes and federal tax deposits) for a period of five years following the acceptance of the offer.  If you breach this or any other term of the offer, the IRS may immediately proceed against you to collect the entire amount of the original tax liability including interest and penalties, less any payments already received under the terms of the offer, with interest on the unpaid balance accruing from the date of default. An accepted offer may also be revoked if the IRS determines that there has been a falsification or concealment of assets, or a mutual mistake of a material fact sufficient to cause a contract to be reformed or set aside. In the event your offer is accepted a record of the amount of the taxes due, and the amount accepted will be available for public inspection for a period of one year at the local IRS office.     The mere act of submitting the offer in compromise will extend the time the IRS has to collect the overdue taxes from you for a period of one year, plus the time that the IRS is considering your offer. Submitting the offer may also delay the earliest time in which you could discharge your taxes in bankruptcy. Until the offer is accepted, interest and penalties continue to accrue on the outstanding balance due.  The IRS will keep any refunds owed to you by the Internal Revenue Service, for tax years before the end of the calendar year during which the offer is accepted. Upon acceptance of the offer, you will give up all rights to dispute the correctness of the tax for any of the years compromised.     The Internal Revenue Service is under no obligation to accept the offer.  Although current IRS procedures discourage it, the IRS may require, as a condition of accepting the offer, that you sign an agreement under which you would pay a percentage of your future income to liquidate the remaining balance on the debt. In no case would the total amount of these payments exceed your actual liability.   Documents_Needed_For_Offer_In_Compromise.doc