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Offer in Compromise
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OFFER IN COMPROMISE AGREEMENT

(Pursuant to 26 U.S.C. § 7122)


[// GUIDANCE: This template is designed as a practitioner-ready starting point for submitting a civil Offer in Compromise (“OIC”) to the Internal Revenue Service (“IRS”). It is not a substitute for IRS Form 656 or Form 433-A/B but may be attached as a supplemental agreement or comprehensive cover document, particularly in complex or high-dollar matters. Adapt as necessary to align with current IRS forms, instructions, and local Collection Division procedures.]


TABLE OF CONTENTS

  1. Document Header
  2. Definitions
  3. Operative Provisions
  4. Representations & Warranties
  5. Covenants & Restrictions
  6. Default & Remedies
  7. Risk Allocation
  8. Dispute Resolution
  9. General Provisions
  10. Execution Block

1. DOCUMENT HEADER

1.1 Title

Offer in Compromise Agreement (the “Agreement”)

1.2 Parties

a. “United States” means the United States of America, acting through the Department of the Treasury and its Bureau of Internal Revenue, commonly known as the Internal Revenue Service (“IRS”).
b. “[TAXPAYER NAME],” a [state] [individual/corporation/partnership/LLC] bearing Taxpayer Identification Number [TIN] (the “Taxpayer”).

1.3 Effective Date

This Agreement becomes effective on the date the IRS signs in the Execution Block (the “Effective Date”).

1.4 Recitals

A. The Taxpayer is indebted to the United States for assessed federal tax liabilities in the aggregate principal amount of $[TOTAL ASSESSED BALANCE] for the tax periods listed in Schedule A.
B. Pursuant to 26 U.S.C. § 7122, the Secretary of the Treasury is authorized to compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense.
C. The Taxpayer desires to compromise the outstanding liabilities on the basis of [doubt as to collectibility / doubt as to liability / effective tax administration] and has submitted all required financial disclosures.
D. The IRS is willing, subject to the terms set forth herein, to accept the compromised amount in full satisfaction of the Liabilities (as defined below).

NOW, THEREFORE, in consideration of the mutual promises herein, the Parties agree as follows:


2. DEFINITIONS

For purposes of this Agreement, capitalized terms have the meanings set forth below. Terms defined in the singular have the same meaning in the plural and vice versa.

“Agreement” has the meaning stated in Section 1.1.
“Applicable Law” means the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations, and IRS administrative guidance in effect as of the Effective Date.
“Collection Statute Expiration Date” or “CSED” means the last date on which the IRS may legally collect the Liabilities under 26 U.S.C. § 6502.
“Compromise Amount” means the aggregate sum of $[COMPROMISE AMOUNT] to be paid pursuant to Section 3.2.
“Default” has the meaning provided in Section 6.1.
“Liabilities” means all federal income, employment, excise, and information-return penalties, additions to tax, and interest assessed against the Taxpayer for the periods enumerated in Schedule A, exclusive of any unassessed amounts.
“Offer” means the Taxpayer’s proposal to satisfy the Liabilities by payment of the Compromise Amount under the terms of this Agreement.


3. OPERATIVE PROVISIONS

3.1 Acceptance of Offer

Subject to the timely and complete performance of the obligations set forth herein, the IRS hereby accepts the Offer and agrees to compromise the Liabilities for the Compromise Amount.

3.2 Payment Terms

3.2.1 Lump-Sum Option: The Taxpayer shall tender $[DOWN PAYMENT] contemporaneously with submission of this Agreement and shall remit the balance of $[REMAINING BALANCE] within [five (5)] business days after the IRS notifies the Taxpayer of preliminary acceptance.
3.2.2 Periodic Payment Option:
a. Initial Payment: $[INITIAL PAYMENT] due with submission.
b. Installments: [NUMBER] consecutive monthly payments of $[XX], commencing on the [DATE] of the month immediately following IRS preliminary acceptance.
3.2.3 All payments shall be made by electronic funds transfer or certified funds to “United States Treasury—Internal Revenue Service,” referencing the Taxpayer’s TIN and OIC control number.

[// GUIDANCE: Mirror the payment structure found in current Form 656, adjusting down payment percentages and installment schedules as appropriate.]

3.3 Conditions Precedent

a. Filing Compliance: The Taxpayer shall have filed all required federal tax returns due as of the Effective Date.
b. Financial Disclosure: Forms 433-A/B (OIC) with substantiating documentation must remain materially accurate through the Effective Date.

3.4 Conditions Subsequent

a. Future Compliance: For a period of five (5) years beginning on the Effective Date, the Taxpayer shall (i) timely file all federal tax returns, and (ii) timely pay all federal tax obligations.
b. Refund Offset: Any federal tax refund payable to the Taxpayer for the calendar year in which the IRS accepts the Offer shall be applied to the Liabilities and shall not reduce the Compromise Amount.


4. REPRESENTATIONS & WARRANTIES

4.1 By Taxpayer
a. Authority: Taxpayer has full legal capacity and, if an entity, proper corporate authority to execute and deliver this Agreement.
b. Truthfulness: All financial statements and documents provided to the IRS are true, correct, and complete in all material respects.
c. No Transfer to Defraud: Since the assessment dates, the Taxpayer has not transferred assets with intent to hinder, delay, or defraud the United States.

4.2 By IRS
The IRS represents only that it has the administrative authority to enter into this Agreement pursuant to 26 U.S.C. § 7122 and does not waive any sovereign immunity except as expressly provided herein.

4.3 Survival
All representations and warranties survive the Effective Date and any court approval, if applicable.


5. COVENANTS & RESTRICTIONS

5.1 Affirmative Covenants of Taxpayer
a. Timely Payments: Remit all payments in strict accordance with Section 3.2.
b. Records Access: Provide reasonable access to books, records, and personnel to verify compliance.
c. Notice of Material Change: Notify the IRS in writing within ten (10) days of any material change in financial condition, including but not limited to acquisition of assets exceeding $[THRESHOLD] in aggregate value.

5.2 Negative Covenants
a. No Additional Encumbrances: Taxpayer shall not grant any lien or security interest senior to the United States’ federal tax lien without prior IRS written consent.
b. No Accelerated Transfers: Taxpayer shall not convey, assign, or dispose of any material asset outside the ordinary course of business without fair market value consideration.


6. DEFAULT & REMEDIES

6.1 Events of Default

Any of the following constitutes a “Default”:
a. Failure to timely make a scheduled payment.
b. Failure to file or pay any federal tax when due during the five-year compliance period.
c. Material misstatement or omission in financial disclosures.

6.2 Notice & Cure

The IRS shall provide written notice of Default. The Taxpayer shall have thirty (30) days from the date of such notice to cure, except for willful misstatement, which is incurable.

6.3 IRS Remedies Upon Default

a. Rescission: The IRS may rescind this Agreement, whereupon the full outstanding balance of the Liabilities, less any payments applied, shall be immediately due and payable.
b. Collection: All administrative and judicial collection remedies shall be reinstated without further notice, and the Collection Statute Expiration Date shall be tolled for the period the Offer was pending plus an additional 30 days.
c. Set-Off: The IRS may offset any federal payment due to the Taxpayer against the reinstated balance.

6.4 Attorney Fees & Costs

If either Party initiates litigation to enforce this Agreement, the prevailing Party shall be entitled to costs and attorney fees only to the extent permitted under 26 U.S.C. § 7430.


7. RISK ALLOCATION

7.1 Indemnification

Not applicable. No indemnity is offered or required.

7.2 Limitation of Liability

The IRS’s liability, if any, for breach of this Agreement shall not exceed the amount of monies actually paid by the Taxpayer under Section 3.2.

7.3 Force Majeure

Neither Party shall be deemed in breach for delays or failures directly resulting from acts of God, war, terrorism, or other events beyond reasonable control; provided, however, that this Section does not excuse the Taxpayer’s obligations under Section 3.2 unless the IRS grants a written extension.


8. DISPUTE RESOLUTION

8.1 Governing Law
This Agreement is governed by federal tax law, including the Code, Treasury Regulations, and controlling administrative guidance.

8.2 Forum Selection
Any dispute arising under or related to this Agreement shall be resolved exclusively through IRS administrative procedures (e.g., Collection Appeals Program, Equivalent Hearing) before resorting to any court.

8.3 Arbitration
Not available. The Parties acknowledge that binding arbitration of federal tax disputes is not authorized under current law.

8.4 Jury Waiver
As disputes are subject to administrative resolution, jury trial rights are not applicable and are expressly waived to the extent permitted by law.

8.5 Injunctive Relief
The Taxpayer acknowledges that the United States may seek a collection stay or other equitable relief to protect federal revenue interests pending resolution of any dispute.


9. GENERAL PROVISIONS

9.1 Amendments
No amendment or waiver of any provision of this Agreement is effective unless in writing and executed by duly authorized representatives of both Parties.

9.2 Assignment
The Taxpayer may not assign or delegate its rights or obligations without the IRS’s prior written consent.

9.3 Successors & Assigns
This Agreement binds and benefits the Parties and their respective successors, assigns, heirs, and personal representatives.

9.4 Severability
If any provision is held invalid, the remaining provisions shall remain in full force, and the invalid provision shall be construed to effectuate the Parties’ intent to the maximum lawful extent.

9.5 Integration
This Agreement, together with any schedules, exhibits, and incorporated IRS forms, constitutes the entire agreement between the Parties concerning the subject matter and supersedes all prior or contemporaneous agreements or understandings.

9.6 Counterparts; Electronic Signatures
This Agreement may be executed in multiple counterparts, each of which is deemed an original. Signatures transmitted by electronic means (e.g., IRS e-signature platform, encrypted PDF) are deemed original signatures for all purposes.


10. EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the dates set forth below.

10.1 Taxpayer


[NAME]
Title: [if entity]
Date: _______

10.2 Authorized Representative (if any)


[POA NAME], Enrolled Agent / Attorney / CPA
Power of Attorney on Form 2848 dated _
Date:
____

[// GUIDANCE: Attach Form 2848 or Form 8821, as applicable.]

10.3 Internal Revenue Service

Accepted on behalf of the United States:


[NAME], Authorized IRS Official
Title: [Settlement Officer/Collection Manager]
Date: _______

Seal: _______ (if required)


Schedule A – List of Tax Periods & Liabilities

Tax Period Type of Tax Assessment Date Original Amount Accrued Interest & Penalties Total Outstanding CSED
[ ] [ ] [ ] $[ ] $[ ] $[ ] [ ]
Add rows as necessary

[// GUIDANCE: After execution, submit the fully executed Agreement, Forms 656 and 433-A/B, initial payment, and application fee (if not waived) to the appropriate IRS Centralized OIC Unit. Retain proof of mailing (certified with return receipt) and maintain a compliance tickler for the five-year period.]

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