Scenarios Where Doubt as to Liability Makes Sense

When you owe money to the IRS for unpaid taxes, you may want to consider an offer in compromise as a potential alternative solution. An offer in compromise is an agreement between the taxpayer and the IRS that settles a tax debt for less than the amount owed. The purpose behind this solution is to give taxpayers a way to pay off their tax debt and earn a fresh start.

Ultimately, the goal is to reach a compromise that is a win-win for both the taxpayer and the IRS. In situations where you have a legitimate doubt as to whether you owe part or all of the tax debt, however, you will need to file Form 656-L, Offer in Compromise (Doubt as to Liability.)

Four Situations Where a Doubt as to Liability Offer in Compromise May Be Right for You

If you have a genuine dispute as to the existence or amount of the correct tax that should be due under the law, a Doubt as to Liability Offer in Compromise may be right for you. This is especially true if your tax problem falls under any one of the following scenarios:

  • You were unable to dispute the amount of tax that the IRS says you owe within the time allowed.
  • The tax examiner made a mistake interpreting the tax law.
  • The tax examiner failed to consider all of the evidence you presented.
  • New evidence has become available that supports your argument for a change to the amount of tax liability.

Deciding which potential alternative solution to your tax problem is right for your situation is not something that should be done without the guidance of a knowledgeable professional. The tax code is complex and the process for disputing a debt is equally challenging. Fortunately, we are here to help. We encourage you to get a head start by checking out our free guide, The Ultimate Survival Guide for IRS Problems.