IRS Offer in Compromise Doubt as to Liability

Doubt as to liability exists where there is a genuine dispute as to the existence or amount of the correct tax debt under the law. These offers are different from Doubt as to Collectability since they are not based on the ability to pay the outstanding liability. Therefore, if you don’t believe you owe a tax, you may want to consider and IRS offer in compromise doubt as to liability.

Taxpayers who have a legitimate doubt that they owe part or all of a tax debt, may file an offer in compromise under the Doubt as to Liability basis. Doubt as to liability exists where there is a genuine dispute as to the existence or amount of the correct tax debt under the law.

Offers submitted based solely on doubt as to liability are received in COIC and Field Collection Area Offices and forwarded to the Centralized DATL processing unit located at the Brookhaven campus.

Taxpayers can submit Offer in Compromise (Doubt as to Liability), DATL, on Form 656-L.

How does the IRS process Doubt as to Liability Offers?

The Centralized DATL processing unit located at the Brookhaven campus will receive from COIC and Collection area offices all Forms 656-L submitted on the basis of DATL, However, they won’t receive those offers involving Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET). However, COIC and Collection area offices will process TFRP and PLET offers.

What documentation or Support is Needed?

You must provide with your offer in compromise package a written statement explaining why the tax debt or portion of the tax debt is incorrect. In addition, you should provide supporting documentation or evidence that will help the IRS identify the reason(s) you doubt the accuracy of the tax debt. Moreover, if you are unable to reconstruct your books and records, you can provide an explanation that supports reasonable doubt justifying a reduction to a portion or all of your tax debt.
Keep in mind, if you fail to provide a written statement explaining why the tax debt or a portion of the debt is incorrect, the IRS will return your offer without further consideration.

How much Should You Offer?

You must provide a written statement explaining why the tax debt or portion of the tax debt is incorrect. In addition, you should provide supporting documentation or evidence that will help the IRS identify the reason(s) you doubt the accuracy of the tax debt. Moreover, if you are unable to reconstruct your books and records, you can provide an explanation that supports reasonable doubt justifying a reduction to a portion or all of your tax debt.

If you do not provide a written statement explaining why the tax debt or a portion of the debt is incorrect, the IRS will return your offer in compromise doubt as to liability offer without further consideration.

If you have a tax liability that you would like to settle for less than what you owe (or compromise), contact a tax attorney to discuss whether the offer in compromise is a legitimate option.