The IRS has provided interim guidance on when an employer is “in compliance” with its federal tax deposit requirements for purposes of making an offer-in-compromise [SBSE-05-0422-0014, 4/25/2022].
Old procedure.
The IRS requires an employer submitting an offer-in-compromise to be in compliance with its federal tax deposit (FTD) obligations. Under the old offer procedure, the IRS treated an employer as “in compliance” with the obligations if the employer made all required FTDs for the quarter in which it submitted the offer (submission quarter) and subsequent quarters.
Note. An offer-in-compromise is an agreement between the taxpayer and the IRS that settles a tax debt for less than the full amount owed. Generally, a taxpayer making an offer must be in compliance with all their tax obligations before the IRS will consider it.
Procedural change.
Under the new procedure, the IRS won’t consider an employer to be “in compliance” with its FTD obligations unless, before submitting its offer, the employer has made all required FTDs for the submission quarter and the two preceding quarters.
Note. If the IRS determines that the employer hasn’t make all required FTDs, the IRS won’t process the offer but will return the offer to the taxpayer and apply any payment made with the offer to the employer’s tax debt.
In addition, the taxpayer must stay in compliance with all its tax obligations (including making its FTDs) though the investigation of its offer and the monitoring period for accepted offers.
Revised Form 656-B.
The new revision of Form 656-B, Offer in Compromise Booklet (Rev 4-2022) must be used for any offer made after May 26, 2022. See Payroll Update, 04/27/2022.
Effective date.
This interim guidance is effective April 25, 2022.
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