I.  Down Payment Requirements for Offer in Compromise.  Effective for offers submitted on or after July 16, 2006.

    A.  The Taxpayer Relief Act of 2005 Requires that a taxpayer who files a lump-sum offer in compromise must submit at the time of filing the offer a deposit of twenty percent (20%) of the amount he or she offers.  IRC Section 7122(c)(1).  For example, if a taxpayer owes $100,000 in back taxes and files and offer in compromise the tax for $40,000, he or she must pay $8,000 with the submission offer.  This amount is in addition to the "user fee" of $150.  Offers received without the deposit will be returned to the taxpayer as non-processable.

       1.  A lump-sum offer is one payable in five or fewer installments. Section 7122(1)(A)(ii).
       2.  If the taxpayer makes a partial payment when a lump-sum offer is submitted, but the payment is less than the 20-percent required amount, the Service may accept the offer for processing and solicit payment of the remaining portion of the 20-percent amount.

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*Dennis Brager, Esq., is a State Bar Certified Tax Specialist in Los Angeles. A former IRS senior trial attorney, Mr. Brager now devotes his efforts exclusively to helping clients resolve their tax problems with the IRS and California State tax agencies. Services include negotiating Tax Debts, Tax Fraud Representation, Tax Litigation, Tax Audit and Appeals Representation,  Tax Preparer Penalty Mitigation, Payroll Tax Audits, and California Sales Tax Problems. He may be reached at 310-208-6200.