Contractual Terms in an Offer in Compromise
 

As a taxpayer, you must understand and agree to the following conditions that will apply in an offer in compromise:

(a) Taxpayer agrees to voluntarily submit all payments made on an offer.

(b) The IRS will apply payments made under the terms of an offer in the best interest of the government.

(c) If the IRS rejects or returns the offer or I/we withdraw the offer, the IRS will return any amount paid with the offer.  However, I/we understand the application fee will be kept by the IRS.  If I/we agree in writing, IRS will apply the amount paid with the offer to the amount owed.  If I/we agree to apply the payment, the date the IRS received the offer remittance will be considered the date of payment.  I/We understand that the IRS will not pay interest on any amount I/we submit with the offer.

(d) The taxpayer agrees to comply with all provisions of the Internal Revenue Code relating to the filing of all required tax returns and payment of the required taxes for 5 years or until the offered amount is paid in full, whichever is longer. In the case of a jointly submitted offer to compromise joint tax liabilities, the taxpayer understands that default with respect to the compliance provisions described in this paragraph by one party to this agreement will not result in the default of the entire agreement. The default provisions described in Form 656, Item 8(o) of this agreement will be applied only to the party failing to comply with the requirements of this paragraph. This provision does not apply to offers based on Doubt as to Liability.

(e) I/We waive and agree to the suspension of any statutory periods of limitation (time limits provided by law) for the IRS assessment or collection of the tax liability for the periods identified in Item 5.  I/We understand that I/we have the right not to waive these statutory periods or to limit the waiver to a certain length or to certain issues.  I/We understand, however, that the IRS may not consider this offer if I/we refuse to waive the statutory periods for assessment or if we provide only a limited waiver.  I/We understand that the statute of limitations for collection will be suspended during the period an offer is considered pending by the IRS (paragraph 8(m) defines pending).  The amount of any Federal tax due for the periods described in Item 5 may be assessed at any time prior to the acceptance of this offer or within one year of the rejection of this offer.  

(f) The IRS will keep all payments and credits made, received or applied to the total original tax liability before submission of this offer. The IRS may keep any proceeds from a levy served prior to submission of the offer, but not received at the time the offer is submitted. The taxpayer understands that if they had an installment agreement prior to submitting the offer, he/she must continue to make the payments as agreed while this offer is pending. Installment agreement payments will not be applied against the amount offered.

(g) As additional consideration beyond the amount of my/our offer, 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. The taxpayer may not designate an overpayment ordinarily subject to refund, to which the IRS is entitled, to be applied to estimated tax payments for the following year. This condition does not apply if the offer is based on Doubt as to Liability.

(h) The taxpayer must return to the IRS any refund identified in (h) received after submission of this offer. This condition does not apply to offers based on Doubt as to Liability.

(i) The IRS cannot collect more than the full amount of the tax liability under this offer.

(j) The taxpayer understands that he/she will remain responsible for the full amount of the ax liability, unless, and until, the IRS accepts the offer in writing and the taxpayer has met all the terms and conditions of the offer. The IRS will not remove the original amount of the tax liability from its records until the taxpayer has met all the terms of the offer.

(k) The taxpayer understands that the tax that is offered to be compromised will remain a tax liability until all the terms and conditions of this offer are met.  Should the taxpayer file bankruptcy before the terms and conditions of this offer are completed, any claim the IRS files in the bankruptcy proceedings will be a tax claim.

(l) Once the IRS accepts the offer in writing, the taxpayer will have no right to contest, in court or otherwise, the amount of the tax liability.

(m) The offer is pending starting with the date an authorized IRS official signs this form. The offer remains pending until an authorized IRS official renders a final determination on the offer by either accepting, rejecting, returning, or acknowledging withdrawal of the offer in writing. If the taxpayer appeals an IRS rejection decision on the offer, the IRS will continue to treat the offer as pending until the Appeals Office accepts or rejects the offer in writing. If the taxpayer does not file a protest within 30 days of the date reflected on the IRS written notification regarding the taxpayer's right to protest the decision, the taxpayer will waive the right to a hearing before the Appeals Office about the offer in compromise.

(n) If the taxpayer fails to meet any of the terms and conditions of the offer and the offer defaults, then the IRS may:

• Immediately file suit to collect an amount equal to the original amount of the tax liability as liquidating damages, minus any payment already received under the terms of this offer
• Disregard the amount of the offer and apply all amounts already paid under the offer against the original amount of the tax liability
• File suit or levy to collect the original amount of the tax liability, without further notice of any kind

The IRS will continue to add interest, as Section 6601 of the Internal Revenue Code requires, on the amount the IRS determines is due after default.  The IRS will add interest from the date the offer is defaulted until the taxpayer completely satisfies the amount owed.

(o) The IRS generally files a Notice of Federal Tax Lien to protect the Government's interest on deferred payment offers. Also, the IRS may file a Notice of Federal Tax Lien during the offer investigation.  This tax lien will be released when the payment terms of the offer agreement have been satisfied.

(p) The taxpayer understands that Internal Revenue Service employees may contact third parties in order to respond to this request, and the taxpayer authorizes such contacts to be made. Further, by authorizing the Internal Revenue Service to contact third parties, the taxpayer understands he/she will not receive notice pursuant to section 7602(c) of the Internal Revenue Code of third parties contacted in connection with this request.

(q) If doubt as to collectibility and/or effective tax administration are checked in Item 6 above, the taxpayer are offering to compromise all the tax liabilities assessed against them as of the date of the offer and under the taxpayer identification numbers listed in Items 2 and/or 3 above.  The taxpayers authorize the IRS to amend Item 5, above, to include any assessed liabilities they failed to list on Form 656.