You can see my previous entries that have addressed the situations in which the Offer in Compromise (”OIC”) is successful recently. However, it is not the IRS policy to not allow OICs- it is just an institutional mindset. IRS personnel are predisposed to enforcement- this means that their view is no tax return is correct and no tax debt is uncollectible. In fact, most audits end in a balance due and most collection efforts are successful from an IRS perspective.
Recently, the Taxpayer Advocate’s Office recommended (as they do annually) for the IRS to conduct the OIC program more liberally. However, this will lost likely fall on deaf ears as Congress, with a push from the IRS, enacted TIPRA 2005- the law that made filing an OIC much more difficult.
The key to an OIC is to know your options. You need to know if you should file an OIC or seek other options. You will need a tax professional that is astute in your options.