Qualifications

To apply for an Offer In Compromise you must meet one of the following qualifications: Doubt as to Liability, which means you believe the debt amount is incorrect; Doubt as to Collectability, which means you can show doubt that the debt will be payed in full under any circumstances; or Effective Tax Administration, which means you believe that collection of the debt will create a personal economic hardship.

Partial Payment

The IRS requires that any Offer In Compromise application must be submitted with a 20 percent down payment on the original settlement plus $150. This payment is non-refundable.

Lien Effects

An Offer in Compromise does not automatically change the amount of tax owed to the IRS. The tax you owe each year is considered a lien held by the state. You have to submit an application of lien closure for the lien to be deemed paid.

Misconceptions

Many start-up tax companies try to use the Offer In Compromise program to promise clients their debts can be settled for a lesser amount. In actuality, many of these clients are not eligible for the program. They end up paying extra in fees to the tax-handler and still have to pay the entirety of their tax debt.

Tax Levies

An Offer In Compromise stops tax levies proposed by the IRS from being carried out while the offer is pending. For example, if the IRS is set to levy a person's home because of a tax debt and that person submits an Offer In Compromise application, the IRS stops the levy until a decision is made on the application.

Source:

What Is An Offer In Compromise?