The federal offer-in-compromise program rests on statutory authority, not on a general promise to settle for pennies on the dollar. Section 7122 should be read with Treasury Regulation section 301.7122-1 and current IRS procedures.
What the authority does
The Secretary may compromise civil or criminal cases arising under the internal revenue laws before referral to the Department of Justice, subject to statutory requirements. The section addresses review, records, deposits, payments, and standards implemented through regulations.
Why it matters in a tax controversy
The first decision is which ground applies: doubt as to liability, doubt as to collectibility, or effective tax administration. A collectibility offer requires a defensible valuation of assets, income, allowable expenses, transfers, dissipated assets, and remaining collection time.
What it does not answer by itself
Submission does not guarantee acceptance, suspend every enforcement action, or make an unaffordable proposal viable. Returned, rejected, withdrawn, defaulted, or terminated offers have different consequences, including effects on collection time and appeal rights.
Research and case checkpoints
- Identify the legal basis for compromise before calculating an amount.
- Confirm filing compliance and current tax obligations.
- Reconcile financial disclosures with bank records, returns, public records, and asset documents.
- Analyze collection-statute effects and alternatives before submission.
Primary and official sources
Currency note: Check the current text, amendment history, effective date, and the version governing the tax period or agency action before relying on this summary.