The IRS issues Form 2751, commonly known as the Offer in Compromise when an agreement has been reached concerning the taxpayers’ federal tax liability. The IRS considers an offer in compromise to be a proposal that fails to satisfy all of the demands of the IRS. This means that the taxpayer may not owe the full amount that he is owed or that the balance of back taxes still has not been completely paid. In the case of an offer in compromise, the IRS proposes to pay the tax liability and allow the taxpayer to settle the balance with the IRS at a reduced amount. When the taxpayer accepts the offer in compromise, he must pay the agreed upon amount plus the balance of the back taxes that were not collected. If the offer in compromise is accepted, the IRS issues Form 668.
To make an offer in compromise, the responsible party must: be a United States citizen; meet the age requirements outlined in the income tax form; have a taxable income; and file a joint income tax return. After accepting an offer in compromise, the responsible party must: send a verified bank statement to the responsible party stating that the liable party’s bank account is currently healthy; attach a copy of the debit account statement proving that funds are currently available for payment to the liable party; and provide the responsible party with a copy of their social security card. The social security card must list the name, birth date, social security number, birth place, current address, and contact number of the responsible party. The social security card serves as proof that the liable party has the right to make an offer in compromise. The form should also include a signature acknowledging the receipt of the form signed by the responsible party.
what is form 2751 used for
If an offer in compromise has been accepted, the taxpayer will need to obtain approval from the responsible party or his/her payroll agent before making the payment. To receive the funds, the liable party must mail the form to the appropriate IRS tax debt collectors within 60 days. The collection agency will hold the funds until the conditions required by the form are met. In some cases the collection agent will send a letter to the taxpayer notifying them that they have thirty days to come into their office to make payment. The IRS will issue an IRS notice informing them that the due amount is unpaid.
In some cases where an offer in compromise has been rejected and the delinquent taxes cannot be collected, the IRS may elect to issue a notice of penalty. Known as an IRS Notice of Penalty, this notice of the penalty is sent directly to the taxpayer and includes all of the pertinent information regarding the penalty. The IRS has two main methods for collecting uncollected federal taxes: Offer in Compromise (OIC), and Penalties.
If an OIC is not approved by the taxpayer, they can request that a letter be sent to the IRS regarding the decision to suspend collection. A letter from the responsible agency to the taxpayer’s employer states that a suspension has been requested due to a lack of proof that the employee owes the payroll tax. If the employer can prove the claim, the IRS may allow collection. If the employer cannot verify the claim, the IRS will issue a notice of recovery penalty stating that the taxpayer owes the tax and can only be collected from the employer who agreed to pay the penalty.
If the taxpayer is unable to meet the terms of the penalty or recovering the money, they may be referred to a taxpayer advocate. Taxpayers can be referred to a taxpayer advocate in cases of default on federal tax obligations, in cases of tax evasion, or if the IRS demands repayment for improper filing or non-filing. The taxpayer advocate will work on a case by case basis with the help of a legal assistant. The services of the taxpayer advocates can be very helpful for people that are struggling with the burdens of the Internal Revenue Service.